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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Dave Feldman who wrote (33628)	10/9/1998 10:10:00 AM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Dave, Like our friend Early, I tend to be Early on up cycles just as I am on down cycles. Stocks like Lam are intriguing, but, I don't think we are anywhere close to being near the bottom of the chip cycle yet. We are currently running on back to school and Xmas adrenaline. The bottom of the business could hit as soon as next Spring. I don't really look for an actual upturn. That is usually too late to make the big and the easy money. I tend to buy right in the middle of the worst times. I have a shopping list of chip and chip equipment companies I would like to buy if they are priced correctly when that time comes. Among them are Amat, Analog Devices, especially if I can buy the convertibles, C-Cube (I know, I've smeared their name all over SI and Prodigy, but there is a price where this is a decent bet), TXN and the gallium arsenide usual suspects. Cash impresses me because it makes a stock attractive for takeovers. And Lam was smart to build a war chest. Compare that to MU digging a canyon of debt. Still, with the business bleeding that cash every day, I am not feeling froggy and am not ready yet to jump. MB MB

To: Dave Feldman who wrote (33628)	10/9/1998 11:08:00 AM
From: eabDad	Read Replies (3) \| Respond to of 132070

Dave: Chip equipment valuations at the low point trade at a discount to both book and sales. Historically, equipment stocks fall into three valuation camps: a star gaining share, the average company maintaining share, and the dog. A price at 0.7-0.8x book value or 0.5-0.6x sales for the downside risk are multiples for an average equipment stock. A leader gaining share can be 40-50% higher and a dog can be half that. Also keep in mind that 1999 revenues and book value will be lower than the current trailing twelve months. On the flip side, valuations at the peak of the cycle (4 years from now) will be 4-5x sales, so the potential return is there. Revenues should be near double current levels. Good math, but a long wait. I think it may be too early to buy any stocks associated with the front-end fab, unless you buy a star gaining share at an incredible value. Given the 6 year business cycle, there will be plenty of time to enter for the ultimate run up. Z