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

To: robert b furman who wrote (85450)	8/9/2020 11:27:57 AM
From: Return to Sender	3 Recommendations Recommended By FJB oldbeachlvr Sr K Read Replies (1) \| Respond to of 95487

Last minute gains to cap strong week 07-Aug-20 16:20 ET Dow +46.50 at 27433.48, Nasdaq -97.09 at 11011.05, S&P +2.12 at 3351.28 [BRIEFING.COM] The S&P 500 eked out a 0.1% gain on Friday to close out a strong week for equities. The Russell 2000 outperformed with a 1.6% gain, as a better-than-feared July employment report contributed to the outperformance of small-caps and value-oriented stocks. The Dow Jones Industrial Average increased 0.2%, while the Nasdaq Composite fell 0.9% amid relative weakness in the mega-cap stocks. According to the Bureau of Labor Statistics, nonfarm payrolls increased by 1.763 million (Briefing.com consensus 2.000 million), private-sector payrolls increased by 1.462 million, and the unemployment rate improved to 10.2% (Briefing.com consensus 10.5%) from 11.1% in June. Optimism surrounding the data fueled the gains in the S&P 500 financials (+2.2%), industrials (+1.7%), utilities (+1.8%), and real estate (+1.4%) sectors, which are four of the five sectors down this year. The top-weighted information technology sector pulled back 1.6% today. Notably, the market didn't show too much concern over the lack of a coronavirus relief bill or President Trump signing executive orders banning U.S. citizens from using TikTok and WeChat 45 days from yesterday, unless they are sold to other companies beforehand. Democrats and the White House remain far apart on key relief provisions and ended today's negotiations without a deal; consequently, Treasury Secretary Mnuchin said he will recommend to President Trump signing executive orders that extend the eviction moratorium and enhanced unemployment benefits. Individual standouts included T-Mobile US (TMUS 115.09, +6.99, +6.5%) after claiming it's now the second-largest wireless provider in the U.S., UPS (UPS 156.88, +11.41, +7.8%) after saying it plans to add holiday shipping fees to high-volume customers, and Biogen (BIIB 305.71, +28.05, +10.1%) after it had its Alzheimer's drug application fast-tracked by the FDA. U.S. Treasuries finished with modest losses. The 2-yr yield increased two basis points to 0.13%, and the 10-yr yield increased three basis points to 0.56%. The U.S. Dollar Index advanced 0.7% to 93.41. WTI crude futures fell 1.9%, or $0.78, to $41.17/bbl. Reviewing Friday's economic data: The Employment Situation Report for July can fairly be labeled better than feared given the surprisingly weak ADP Employment Change Report seen earlier in the week. The government's official report indicated that private-sector payrolls increased by 1.462 million in July. The nonfarm payrolls number was even larger at 1.763 million. The key takeaway from the report is that the labor market is recovering from the shock of the COVID-induced seizure, but still has a long way to go, evidenced by the 10.2% unemployment rate and a 55.1% employment-population ratio that is far below the 60.7% level seen a year ago. Wholesale inventories decreased 1.4% in June (Briefing.com consensus -2.0%) following an unrevised 1.2% decline in May. Looking ahead, investors will receive the JOLTS - Job Opening report for June on Monday. Nasdaq Composite +22.7% YTD S&P 500 +3.7% YTD Dow Jones Industrial Average -3.9% YTD Russell 2000 -6.0% YTD

To: robert b furman who wrote (85450)	8/9/2020 1:35:58 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 95487

Hi Bob, It is in the nature of cyclical industries to have huge upfront costs and huge incremental margins. A good example is the oil industry or mining. It takes a ton of money to explore and develop a new oil field or mine, but once you do, above a certain price it is almost pure profits. Think of the gold miners. Even the worst produces have a base cost of under $1400/Oz (the average is ~$900). So at today's prices they are all profitable. If gold ever becomes $3000/Oz, it may become feasible for someone to try to extract it from sea water. This characteristic of huge marginal profits is what pushes other players (including governments) into investing in the industry, often near the peak of the cycle (b/c that is when the profits are highest and a business case can be made easiest). Now if you look at the semi industry, it shares all these characteristics. Fabs cost huge amounts of money to build, and the pay offs are greater as the cycle expands. Furthermore, the demand is also cyclical adding more to the profit margin expansion and the incentive to invest in greater production capacity. That is until the capacity exceeds demand, which is often followed by the demand tanking on its own. What I am getting at is that there is no escaping the nature of the beast. It is even more obvious in the natural resources sectors - just take a look at long term charts of SP Oil subsectors. But its effect is there for all cyclical industries. There is just no way that a hot industry will not attract additional attention and investments. There is never going to be a time that Wall Street analysts will not project the high profits into infinity and not make a case for why they shares they are bringing public are not undervalued. What the semis have going for them so far is that there is not much in the way of new hot IPOs and excessive industry investments coming in - not yet anyway. But on the whole, they have done much worse than secular growth technology companies. And it doesn't matter which chip or semicap company you look at.