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

To: Jacob Snyder who wrote (50572)	1/1/2011 10:11:48 PM
From: Sam	1 Recommendation Respond to of 95572

3. The reason the PEs are low, is because a) we are looking at cycle peak earnings in 2011, or b) we are in a secular bear market and all PEs have been falling since 2000. Or (c) there is a great deal of uncertainty about what the coming year (or two) will bring, and therefore people are unwilling to give semi companies higher PEs. Being unmercifully pummeled as the sector was in 2008 tends to make investors gun-shy. Understandably so. However, IMHO, this year we will see NAND shine and logic do fairly well, while DRAM continues to get hit as the Taiwan vendors struggle to survive, and the companies that serve the different sub-sectors will decouple from each other. Eventually, the Taiwan vendors--or at least some of them--will accept that not all of them can survive, and will take Elpida's offer to merge. That is the only hope for them. DRAM will consolidate, and eventually become a healthier sector, with 3 or 4 players intact. NAND will continue to shine because it is probable that demand will continue to be strong enough due to tablets and smartphones until the vendors' continually falling costs allows their Mother of All Demand Drivers (SSDs as a mass market for businesses and consumers) to be cost effective. And that will be a demand driver for years to come, IMHO.

To: Jacob Snyder who wrote (50572)	1/2/2011 12:57:42 PM
From: Donald Wennerstrom	3 Recommendations Respond to of 95572

You bring up several points so let me make a brief comment on each from my perspective in accumulating the data over a fairly long time period. <<1. There is a tight grouping in the PEs: aside from a few outliers, most are in the 9-12 region.>> By picking a random sample of stocks in a sector(semis here), there will be a grouping around some mean. At the moment we are in the 9-12 mean region. This is usually a slow moving mean, determined by the amount of pessimism or euphoria in the market at any given time. <<2. There isn't any relationship between PE and LT expected growth rates. That's because a) nobody believes the LT growth rates, or b) the market is Inefficient, or c) nobody is using forward PE to value the companies. Take your pick.>> I think at best there is only a "loose" relationship between PE and LT earnings growth rates. Both numbers can fluctuate at a rapid rate, up or down. <<3. The reason the PEs are low, is because a) we are looking at cycle peak earnings in 2011, or b) we are in a secular bear market and all PEs have been falling since 2000. >> I think the low PEs reflect a certain lack of confidence going forward in terms of how long it will take the economy to fully recover. A favorite word I like to use is "risk factor". I think the mean PEs of a sector, or sectors, reflect the amount of risk in the overall economy looking forward 6 to 12 months. <<4. If COHU is really going to grow earnings LT at a 27%/y rate, and we aren't at the cycle peak, it's a steal at a PE of 12, and we should load up on it, preferably yesterday.>> COHU only has 2 analysts following the stock. All relatively small cap stocks "suffer" from this situation as opposed to stocks like INTC that have 20 to 30, or more, analysts following the stock. With only 1 or 2 analysts, adjustments to the outlook for the stock are not made often, and numbers can be to the high or low side so consensus means do not mean much.