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

To: Carl R. who wrote (5448)	5/18/1998 3:41:00 AM
From: Fortinwit	Read Replies (1) \| Respond to of 10921

briefing.com: "The risk in Semiconductor Stocks" briefing.com Briefing.com makes a compelling case that much of the potential rebound expected in 99 is already priced into the semis, and the risk of disappointment is quite high. They have calculated an unweighted P/E of 21 for the SOX components for 99. (I've been practically beholden to briefing since last year when I sold off KLIC @ 57 on their call...) Of course, none of this is particularly optimistic when applied to those companies that supply the semis.... F. Some quotes: "Many investors forget that semiconductor stocks used to be considered cyclical and volatile stocks. In recent years, they have come to be treated as growth stocks, where steadily rising earnings are virtually assured. This is an assumption that will be tested over the next couple of months. If any doubt starts to creep in that the earnings rebound is not forthcoming, semiconductor stocks could take a beating. On the other hand, a great deal of good news seems to be already priced into the market, given the average P/E of 21 for 1999 earnings based on a very strong rebound in profits. This despite that fact that there is as yet no sign of rebound in the industry." "Semiconductor companies could experience a strong rebound in profits later this year and in 1999. For investors in these companies, they had better, because that is largely priced into these stocks. Further upside in these stocks presumably requires an even brighter outlook than presently assumed. This limited upside potential must be balanced against the risks that the presumed profit rebound doesn't occur. Even for investors that place a low probability on that scenario, the large downside risk should not be ignored. From Briefing's perspective, the risk/reward ratio on these stocks is simply not enticing. On May 11, Briefing downgraded the semiconductor sector, and on April 15 we wrote a text outlining our concerns about Intel (available in the archives or upon request) as we dropped it from our Core considerations. The semiconductor stocks have had a great run, but maybe too much so in advance of an expected, but still uncertain, strong rebound in profits. "