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

To: andy kelly who wrote (19667)	5/25/1998 4:36:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

Andy: re: LEAPs: 1. "INTC LEAP a better buy than AMAT LEAP at current prices" Yes. The key phrase there is "at current prices". 2. "Even assuming a price double in 2.5 years, which is a lot more than historical price appreciation, neither LEAP is all that much better that holding the stock, with much greater downside." I think a double will be easy, and possibly a quadruple, if you can buy AMAT LEAPs within 20% of the bottom, when it is at or below a P/S of 2. In the last three peaks, (1993, 1995, 1997), top P/S was 2.7, 3.0, 4.4. That rising trend of peak P/S ratios supports Brian's belief that AMAT is gradually being given a higher valuation. If you buy at a P/S of two, and sell at 4.0, that's a double. Sales, of course, will also be up. I think this prolonged downturn will be followed by a prolonged upturn (mid-1999 to 2003????) 3. If you think the stock will only double, then you should buy the stock, with maybe a bit of margin. 4. I think there is little risk in the LEAP, if you buy the longest-term LEAPs, and buy a strike price that you are 95% sure will be well in-the-money by 6 months from expiration. Assume you buy INTC LEAPs when the stock is 74, and it goes to 60 in 1999, and then 150 by July 2000. Then the LEAPs will have gone from 13 at buy-in, to about 7(lost about half their value) in 1999, but be worth about 54 when you sell them. You only lose if you get scared and sell in 1999. Risk is not the same as short-term volatility. A lot of people confuse the two concepts.