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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (3270)	11/3/1997 4:54:00 PM
From: Douglas V. Fant	Respond to of 10921

Justa, Thanks- that sounds like an appropriate nickname. I write articles for Joe Dancy to post in his Lonestar Growth Investor Newsletter (which is free- write Joe @ "jdancy7658@aol.com" and just ask to be placed on his newletter.) I was looking at the flip chip arena based upon our two general biases in selecting stocks: we generally like small caps as they receive less institutional following; and we like to ride trends by buying the stocks of suppliers of goods and services to the end manufacturing companies. If you check out the list of Joe's picks in his LSGI Newletter, most of the stocks fit both of those themes. And as a stock selecting technique it seems to work pretty well. What we are trying to ascertain is the impact upon suppliers to the semiconductor and disk drive industries of the move to thinner and lighter products-i.e., increased use of flip chips, flip chip packages, and assorted related supplies. This whole move to thinner and lighter products will be one of the interesting of many themes in high tech stocks for the next couple of years. In addition I believe that most people are understating disk drive demand going forward. This is important because you had in disk drives a situation similar to the overpurchases in the semiconductor sector of a couple years ago. That is with the uncertain yield on these new MR drives, dd companies were ordering extra internal components for disk drive assembly thann were completely necesary to assemble x number of drives. As MR heads become more reliable and flip chips become a regular component thereof, then this overordering will fade. Thus most analysts see a slacking of demand in the dd area for component purchases/ assembly. Well I'm not sure that absolute underlying demand for DD's won't "fill the gap" for the previous component overordering. We'll see. Flip chips don't just go into DD's; there are literally dozens of uses for flip chips; form pollution control monitors to ASIC's. But instead of trying to guess who wins/ loses with use of flip chip in end products, Joe and are are discussing what suppliers benefit whether those flip chips go into DD's or ASIC's, and what equipment is needed to manufacture flip chip related components. So far we have identified SFLX, and are also leaning towards KLIC and INVX as significant beneficiaries of the trend toward lighter and smaller in electronics equipment, and which are small enough for flip chips to impact there bottom line (For e.g., Hyundai and IBM will also benfit from flip chips, but the impact upon the total corporate bottom line will be likely negligible), and which have stock prices that suggests some upside potential (For e.g IMO AFLX is a "better run" company than SFLX, but it's stock price is already much higher...). And there are many other companies we are reviewing. This is not to say that KLIC's and INVX's revenues will be juiced by flip chips tomorrow, but looking out 5 years into the future, both companies are positioning themselves to gain a benefit from this particular trend in electronics equipment.... More to follow in Joe's Newletter as we gather more relevant information.... Sincerely, Doug F.