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Technology Stocks : Lam Research (LRCX, NASDAQ): To the Insiders -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (2604)	2/28/1999 5:51:00 PM
From: Duker	Read Replies (2) \| Respond to of 5867

Here it goes: With LRCX, we witnessed a situation where the stock price was punished to the point where it became a "value stock." I hate using the term "value" because it opens a can of worms regarding the word's true definition. In essence, value to me is like pornography, you know it when you see it. So let's operate under the assumption that from $9 to $10 to $12 to $14, LRCX was a value stock in almost anyone's book. In fact it was a deep value stock. This term I cannot define ... so here is the analogy: a 911 Turbo is a valuable Porsche, but a 959 is a real valuable Porsche. At those levels, in the institutional world, stocks attract a completely different group of portfolio managers. These guys do not promise their clients the world. They promise to take on less "risk" than the market as a whole by buying inexpensive stocks. They are not afraid to buy technology, they just buy it when it tends to be most beaten down. They also tend to be pragmatic about selling. From $10 to $24 in a few months? I am out ... or at least trimming way back. After all, it is basically a tax free world for these guys. They know that the stock is still cheap at $24, after all their models showed that LRCX could earn up to $4 in the next cycle -- a 5 P/E ... "it is a giveaway here." However, it is just in their constitution to take money of the table ... because at $24 there is a hell of a lot more market risk in the stock than at $9 -- especially in light of the fact that the earnings number may not be evident for a couple of years. They sell. The stock is running. Based on what? Some bookings turn evidence? They beat the number last quarter? They look at from whence they had come and sell. To whom the sell is the problem. Mo guys. LRCX beat their earnings estimates. B:B is greater than unity. AMAT's numbers look good. That is all you need to know. Buy 'em all. Then, there is some noise. Merrill doesn't like the PC business. Negative for tech, negative for semicaps. CPQ is going to miss their numbers. Negative for tech, negative for semicaps. Techs feel ahead of themselves. Negative for tech, negative for semicaps. The Mo guys shoot 'em. Move on to the next ones. Drugs? Internets? Whatever. LRCX goes down. Value guys watch. Mo guys just keep selling. Traders balk. Investors wait. <<This sounds as if the momentum guys ran the stock up too high and yet further down you appear to believe that this correction is a tad overdone.>> To answer your question, the Mo guys ran it beyond the first line of defense -- the "deep" value guys ... heavily market risk averse. This does not mean that they ran it up too high. They just ran it above the shorter-term "pure' value folks. I was perfectly comfortable with the stock at $39. To me that is less than 10 times earnings. I would argue that my time horizon is a bit longer than the typical fund manager who must perform every quarter, err,... every day. I know this has been a disasterous explanation. But, I must stop. My pregnant wife is hungry and I fear her wrath. --Duker