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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: akidron who wrote (19224)	5/9/1998 1:31:00 AM
From: Gottfried	Read Replies (3) \| Respond to of 70976

Aki, darn it, you made me think again. <G> You said... >>U may say "but that's in the price"... but remember revenues in the second half of this year are likely to be at the level they were in '95 and the 1st half of '99 might well be worse...<< The bad news we've heard recently has had no effect on the price. It should have had an effect. Maybe the hundreds of funds holding AMAT are in denial. More likely, they are willing to wait till '99, as long as AMAT doesn't drop from here by YE '98. Everybody owning AMAT expects great gains - they just don't know when. But whether you get a double (or more) in 12, 18 or 24 months - it is still a great gain. That the gain will happen is virtually certain. About how many stocks can you say that? This is a teflon stock right now. Reminds me of the President: bad news just can't hurt him. I am hoping to buy more AMAT at lower prices, too. But (absent a major market correction) it may not go below 30 again. Almost everybody has learned that AMAT eventually will go up big. No, I don't think the existing and the potential bad news is "in the price". And it may never be in the price. For those already holding AMAT this matters little: they won't sell until 100 (or whatever) anyway. And those waiting to buy much cheaper may just be disappointed. It doesn't help to bemoan the market's lack of reason. We're probably better off watching the charts than monitoring every announcement on Yahoo. 26 of us expect the low and high for '98 to be 27 and 53, on average. Will our collective wisdom be any better than that of the analysts? All the estimates are at... geocities.com GM

To: akidron who wrote (19224)	5/9/1998 11:11:00 PM
From: Jacob Snyder	Read Replies (5) \| Respond to of 70976

akidron, you said: if your view is very long term the odd ten points or so really doesn't mean much Sorry, I must take issue. You were probably being ironic, but there are many people who make similar statements in earnest. There is a widespread attitude that, as long as you buy quality companies with growing earnings, you can pay any price, buy in at any PE, and do OK long-term. This is dead-wrong. It's easy to buy great companies at high PEs. It's easy to buy third-rate companies at low PEs. The hard task, and the only way to beat the index funds long-term, is to buy companies with great long-term prospects, on the rare occasions when they are cheap. Those occasions may be very rare indeed. The last time MSFT was on sale was 1987. I'm hoping DOJ really crucifies them, so I can buy the stock at a PE below their growth rate. If you didn't buy CSCO in mid-1994, you had to wait 3 years before they were out of favor and buyable. Sure, you could have bought CSCO at a PE of 40 lots of times, but your returns would not be very impressive. If you are going to hold AMAT for several years, your entry point is critically important. A few points difference in the buying price makes a huge difference in the final percentage return. Lets assume you sell AMAT at 120 in the year 2002. Buy at 30, and you made 400%. Buy at 40, and you made 300%. The "odd 10 points" made a 100% difference. Another rationalization for buying high was recently made by Brian. Use trailing 12 months earnings, and today's PE looks uncomfortably high. No problem. Just use 1998 earnings. Don't worry about the fact that those estimates seem to change a lot. And if that isn't good enough, just keep on going into 1999 and 2000 and...... Eventually you can calculate a PE that allows you to believe the stock is undervalued. Let's see, they will earn $9.00 a share in the year 2010, so they are an incredible deal at a PE of just 4!