Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Ian@SI who wrote (4016)	12/19/1997 9:50:00 PM
From: Investor2	Read Replies (1) \| Respond to of 10921

RE: "Parking money in SPDRs (e.g. AMEX:SPY) or "beating the Dow" when the semis are near their high ratios is starting to appear attractive." Over the last few years that would have been an excellent strategy. bigcharts.com Over the next few years - who knows? It is probably a good assumption that the S&P will continue to be less volatile than the SOX. I guess the hard part will be to determine the points at which to switch in and out of the semi's. It's always easy to determine when the proper time to switch was, but it will be difficult do in real time. For instance, is now the time to move money out of the S&P and back into semi's? Best wishes, I2 P.S. Sorry, I can't seem to get the comparison to S&P 500 to come up when using the link above.

To: Ian@SI who wrote (4016)	12/20/1997 2:32:00 AM
From: geoffrey Wren	Respond to of 10921

Ian, my idea would be to track historic pe ratios for the individual stocks. For some reason my favorite stock, cohu, even though it has been a fantastic growth stock, cannot trade at a high multiple for long. ADCT another favorite, high a much higher range. If over the years I had sold off when they got to the high end of the historic range, I may have done better than just holding. I'm getting close to trying this approach. Geoff Wren

To: Ian@SI who wrote (4016)	12/20/1997 5:10:00 PM
From: Justa Werkenstiff	Read Replies (3) \| Respond to of 10921

Ian: Re: "I'm still trying to come up with an implementable strategy for staying almost fully invested but not holding full positions in the Semis when they're trading near highs for P/S, P/Bk & P/CashFlow. Parking money in SPDRs (e.g. AMEX:SPY) or "beating the Dow" when the semis are near their high ratios is starting to appear attractive." Not if at the time of the switch the P/E for the S & P is at the high end of its historical norm (like now) given projected inflation and earnings. At Friday's close, the S & P was trading at 946.78. I see projected S & P earnings for 1998 at about 6% over 1997 projected earnings $47 for $50 in 1998. That is a 19x multiple forward earnings for 1998 where the market in any environment has never traded over 22x trailing earnings to my knowledge. Moreover, unlike in the semi equipment area where the market has already discounted the effect of Asia to a large extent, many analysts still project double digit growth in earnings for the S & P for 1998. Abby Joseph Cohen, who has been dead on in her analysis of this bull market, sees 8% growth in S & P earnings. The analysts are just getting around to gauging the effect of an SEA slowdown on the S & P, whose earnings BTW are about half derived from foreign sales. I am not sure if the market has adequately discounted the effect of a slowing SEA on the earnings prospects of the S & P as of now; I am fairly certain that the market has more than adequately done the same to the semi equipment sector. Comparing the price of the S & P in relation to its growth and the inflationary prospects, I think the values in the semi equipment sector are so much more compelling on a P/E basis (even with downward revisions) (ie, AMAT at 15x forward at $30 per share currently) when considering growth prospects (AMAT = 20% + growth vs S & P 500 at 6% to 8%). Today, I believe the prudent decision would be to move funds from S & P based investments into the semi equipment area as has been my tendency of late provided there are limited if any tax consequences. As to what one does at the time one views the semi equipment area as overvalued with limited growth, that would depend on the relative value of other assets at the time. BTW, if you are going to do SPYs you might as well consider MDYs which are the midcap equivalent to SPYs. I don't think you can buy the Russell 2000 on the exchange for small cap exposure although Vanguard has an index fund which tracks the same.