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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: etchmeister who wrote (32577)	9/14/2006 8:58:21 AM
From: sixty2nds	Respond to of 95396

Since you asked ... 04:13 Applied Materials and Cymer mentioned positively in Weekday Trader - Barron's Online Barron's Online reports chip-equipment stocks such as Applied Materials (AMAT) and Cymer (CYMI) are tricky right now and a backup strategy is to sell put options on equipment makers, which yields a tidy premium upfront and positions investors to buy shares at prices below the current market price in the event the put is ever exercised. "We like to own companies that are dominant in the equipment market, regardless of what the chip sentiment is out there at the moment," says Kevin Landis, a portfolio manager with Firsthand Funds. Landis owns Applied Materials and thinks it could go above $20 a share by year's end. He likes Cymer despite its 25% rise this year, given that it may increase its share of equipment dollars. Equipment stocks seem to have turned a corner, with Applied up 15% in the last month despite being down 2.7% in the last six months. Cymer has risen 14% in the last month, but is still down .6% in the last six months. Orders for chip equipment have peaked this quarter, says Dan Tracy, a chip equipment analyst with research firm SEMI. But a decline in orders may actually be a good thing, because investors respond by buying the shares in anticipation of a subsequent rise in equipment orders "within two or three quarters," from now, writes J.P. Morgan's Jay Deahna. Cymer is a dominant co and with 90% of the market for lasers used to etch transistors, it seems to have everything to lose. But Cymer's average laser price could rise by 50% over the next two years as Intel (INTC) and others move from older krypton fluoride lasers to new, higher-priced argon fluoride systems, says Mark FitzGerald who follows the co for Banc of America Securities. Cymer trades at 16.1x forward four quarters earnings, way below the industry average of 21x. There is still the risk that too much chip inventory will go unsold this holiday season, and that could prompt delays or cancellations of equipment for a quarter or two. And for that reason, some investors may prefer selling puts, which means putting less money at risk than buying the stocks outright.