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

To: EACarl who wrote (41948)	12/2/2008 1:51:22 PM
From: Pam	3 Recommendations Respond to of 95616

Strange that I don't see companies with losses trading at zero. ;-) First, I never said that companies with losses should trade at zero. Second, you should keep in mind in what context my remarks were made. Point is obviously that EPS has nothing to do with stock prices once there aren't earnings. What to use then? Historical trough price to sales ratios? Net tangible equity? Net working capital? Net cash?! Estimated future recovery earnings? Some of these stocks already trade for less than the liquidation value even after taking into account future losses. If you want to get that technical, than yes, EPS would also be an incorrect measure to figure out a company's worth because EPS can be easily manipulated! The best way would be to forecast future CFs and discount them back to present! It involves a lot more work and is not practical to do such a thing for all the stocks that you follow and more importantly, it is hard to estimate CFs into the future so your valuation will invariably be off the mark! There are stocks which are trading for less than liquidation value but then you have to ask if that value will be realized unless the company goes into liquidation? Are you willing to wait for that long if that is the eventual thing waiting to happen? So buying just because they are below their liquidation value does not always work! Most executives are optimistic and they believe they can turnaround their business and keep taking on more debt or burning more cash and a lot of wealth gets destroyed over time. I haven't seen too many bankruptcies in technology area because they either get bought out or somehow survive but as a much smaller and less desirable entity so buying for liquidation value is not such a great idea most of the time. Valuation is an art, not a science. Use whatever works best with your investment philosophy, holding period, tolerance for risk, etc. It's all about psychology. At some point there will be more investors willing to look past the downturn and toward the recovery. At that point the stocks will rise. Will they anticipate by 6 months, 9 months, 1 year? I think it depends on how low we go. The lower we go the sooner the stocks will anticipate because the start of the rise will come from value players, then as the change in trend is seen others will join in regardless of what point in time the recovery is supposed to begin. Sure it is. Psychology and human behavior play a huge role in any stock price movements because investment decision are made by people and most people are emotional and cannot always think rationally. Some market timers are smarter than you and me and they play the human psychology game extremely well. I cannot but agree that stock prices will go up when demand for shares is higher than supply. I do not think, we are there yet as far as SCE sector is concerned, and that's all I have said. If you were to buy LRCX for a return in a month, would you buy it now? If you were to buy it for a return 2 years out, would you buy now? So depending on what your investment horizon is, the investment decision could be totally different. It is my belief that in general, semiconductor companies will move much faster than semiconductor equipment vendors, whenever the turnaround happens. I have been wrong before and it wouldn't be the first time, but that's what I believe in and stick by the comments I made. I would rather buy stocks when things turn around for them, than buy them hoping they have hit a bottom!