GM, teri, Paul:
GM: thanks for the Nordby site.
teri: going on vacation for the next three weeks, so won't be able to respond to e-mail
Paul: (repost of private post, with permission, re what to do now):
Having held from 16 to 52 to 32, (you still have a double!), you have two choices:
1.continue holding. Grow some prize strawberries, kayak around Australia, and don't look at the stock price for the next two years. Having made the decision to hold, watching the day-to-day (and month-to-month) volatility is painful, and pointless.
2. wait for the next bounce up to the 37-40 range, and sell it all. Then watch the stock very carefully, and start buying in increments when the stock hits 26-28. If we reach Jan. 1999, and the stock still hasn't slid below 26, then load up at any price below 40. This is what I'm doing. Actually, I'm taking even more risk, and watching the stock even more closely, by shorting.
I think the most likely thing is a trading range until next earnings report. I had thought the trading range would be 26-32, but as usual, AMAT surprised me with it's volatility. Looks like the trading range will be more like the 26-40 range we've been in for a verrrrrrry long time.
I held shorts through earnings report, which I would not have done if I thought there was any chance of good news. And I bought puts just before and after the report. I plan to cover shorts and sell my puts when the stock bounces at 26. If we get close to the next earnings report, and 26 has not been broken, then I will probably buy a large chunk of 2001 calls (40s).
I (like you) am not very sure of my current position:
On the one hand: the earnings estimates for 1999 just keep going down. It's difficult to justify today's valuation if the upturn doesn't happen till year 2000, and the company only makes one dollar/share in 1999. And the general market conditions show every sign of a top. The rising tide will not keep lifting our (good and bad) boats, because the tide isn't rising any more. We've got to get much better at picking stocks and entry prices, in order to make money, in the next 5 years, compared to the last 5 years.
On the other hand: I'm tired of arguing with the market. This stock is showing an extremely durable support line at 26. The basing action is wide and deep. On the first whiff of a rumor of good news, the stock zooms to the high 30s.
re: the BTB: it will improve, as billings decline to meet bookings, both at a low level. This is not a buy signal. The buy signals are my bottom indicators (half of them have happened now), an uptick in bookings, and a some hint that semi supply/demand is coming into balance. The current price stability in DRAMs is only happening because fabs are operating far below capacity. When the excess capacity is soaked up, or capacity is permanently taken out, or current equipment is made obsolete, then AMAT will see an upturn in orders. I can't see this happening till early 1999 at the soonest.
bottom indicators:
1. Inventories have fallen, and chip prices have stopped plummeting. However, a lot of overcapacity still exists, and prices have stabilized at a level where large sections of the semi industry are losing money. I still think that semi companies have to be actually making profits before they'll order a lot of new equipment.
2. capitulation: hasn't happened.
3. consolidation: starting to happen in semis, not yet in semi-equips.
4. the last analyst downgrades. Downgrades and earnings estimate reductions are still happening.
5. uptick in orders for semi-equip: hasn't happened. This may be a lagging indicator, I will buy before this happens.
6. P/S at low end of range. Has happened for small-caps, not yet for large caps (amat, nvls).
7. semi stocks trending up. Yes.
8. let the market tell you. We've formed a triple bottom at 26, we've had almost a full year of bad news and buyers still keep stepping in to maintain that support line. I'm beginning to wonder what it will take to break that line. Maybe the Japanese, Russians, and Chinese will all devalue at the same time, and the Dow drops another 10%.
Overall, I made the decision several months ago that the downside risk was higher than the risk of missing the upturn. I still think that's true. The latest CC showed more uncertainty, and more pessimism about market conditions, than the previous one. Management said: "We're the best company in a bad industry, and it's going to stay bad for as long as we can see." I think I've still got several months of volatility, at least, in this basing pattern, before the stocks head up (and stay up).
Hope that helps. As I say, I'm not really sure my position is the best. |
