Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Duker who wrote (2623)	3/12/1999 6:50:00 AM
From: Duker	Read Replies (1) \| Respond to of 5867

OT-ish All is quite. Except for the random and volatile nature of the stock price. I suppose I would feel better if the Market was not so enamored with itself. Dow 10,000? What does that mean? Records for the S&P? The S&P has, long ago, failed as a useful indicator of anything but the largest companies ... cap-weighted indexes? Who cares? It is just intense noise. Really intense. I have no qualms with the general valuation levels. I am not a big picture, macro-market guy. Though, when I read articles that talk about the relative "cheapness" of FDC because it trades at only 22 times forward earnings versus an S&P at 33 times earnings ... I get a bit troubled. Conceptually, it is difficult for me grasp what 33 times means: a 3.03% yield? If you believe that earnings are roughly equivalent to free cash flows over the long term (very long!) -- 3.03% is not going to be a whole lot better than inflation over a longer period of time (excuse me, New Paradigm folks ... at a minimum, you are not getting compensated for that elusive "market risk" ...). I suppose that 33 times is a fair price for an index at some point in a cycle. In 1991, before the LH had proven itself Chrysler (a parallel to LRCX -- we are on the LRCX thread!) had at least that multiple. But where are we now? Is FDC going to really "pump it up" and get those revenues humming, work the margin lines, and get those earning a'flyin'? I think not. More importantly for the index folks, is GE poised to live up to its multiple? Let us assume that we are living in a market of stocks and not a stock market. In our world, indexes are meaningless; stock selection is of paramount importance. This is why I do what I do. I believe that properly managed funds can outperform over the long term -- contrary to the academicians who have proven that theory wrong with about one million regressions ... attempting to capture performance from a basket of investment marketing companies, who, by definition, can not properly manage mutual funds or other pools of money [I will stop here before I ramble about the structural problems that plague most mutual funds -- I do not include Mason Hawkins, Bill Ruane, and Marty Whitman in my critique]. So, what worries me? I get concerned with the general level of expectations. I talk to too many reasonably intelligent and wealthy people who are conditioned to returns that are simply not sustainable. I had one gentleman in my office whose 4 year plan was to grow his assets to $10 million. I asked him if he was planning on giving me $8 million to manage. His response was, "no, about $3.25 million." I was astonished. I know money doubles every five years at 15% (actually, 4.95948 years for those of you who are more mathematically aware than I), but a more than a double-and-a-half in four? Try 32.44% CAGR. Perhaps there is some self-selection here. Maybe the expectations for these returns are maintained mostly be ex-Yuppies, who were indoctrinated in the '80's? Sure, the Market Crashed in '87. Whatever. Look at my yacht. Still, expectations are pivotal. When do we finally have a down year? When does the world come to an end like it did last Fall? If it does, are people going to pay for an "earnings on the come" company like LRCX? I would argue, NO. Does the public market valuation handicap the operations of the business (aside from the options-incentive issues)? No. Could we fall back to $17? How about $8 5/8? I do not know, nor should I care. True wealth is not generated by mindless trading. Even "informed" trading is a very difficult art to practice. Though, I would argue that active traders derive utility from the process itself -- not just the net, after-tax returns. Sometimes I wish that I could just step away for a couple of years ... or even a few quarters! A turnaround in the SemiCaps is a lot like turning an oceanliner; once it starts, it has a momentum that is difficult (though not impossible) to stop on a dime ... not to mention, reverse. Are we in the midst of a PC slowdown? I do not know. Units seem to be up, revenues not as much. Telecom? Seems okay. Y2K? Your guess is as good as mine. Office 2000? Ugghh. What is the term: cognitive dissonance? What does this have to do with LRCX? We can argue about their market position. Are/can they gaining/gain back share in Oxide Etch? Metal etch seems good, can it last? What does Teres mean? Why haven't we seen the big (and inevitable) merger? Does break-even come upon us more quickly given the recent spate of orders? What does the business model look like with the company's current cost structure and efficiencies (or lack thereof)? What will VSEA trade at after the VAR spin? Why doesn't Z trade higher? Why doesn't anyone care about HMN? Is it possible that RHD will trade at this ridiculous multiple forever? No more. Got to go. Sorry, I did not really edit this ... it should look a bit sloppy. --Duker