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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: KurtSS who wrote (4166)	3/30/1999 7:04:00 PM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

Semi-Equipment Comments KurtSS: Over the past two book-to-bill reports (middle of each month), there has been an increasing amount of orders being won by the big boys like AMAT. In fact, in the last BTB AMAT took home a more proportionate share of the total orders when compared to the previous month. In addition, we are in the middle of a large cap love in. So over the past month we have seen the small semi-equip players correct more so on a percentage basis than their large cap brethren. Some good companies have corrected 50% from their highs. AMAT, on the other hand, has corrected about 10%. And if you look at the valuations of the small cap players when compared to the large caps in this sector, I cannot recall a time when there has been such a divergence between the valuations on a price/book and price/sales basis. Yes, AMAT has done very well and deserves a market premium. But even taking account this outperfromance by AMAT, it is now trading close to an all time record high valuation in this regard when analyzed on the same basis, and we are not even close to the cycle peak. In the past few weeks, we have seen FSII (a small player) report below expectation earnings. And it got hammered. But then SFAM (another smaller player) announced better than expected earnings with a favorable outlook a week ago. The market yawned and SFAM is retesting its lows. This is highly unusual. So, whether rightly or wrongly, the market has decided that the smaller players are not worth holding. And if you chart the small players going into the close of the quarter, you will see a steady decline in price. Chart CYMI, PRIA, ASYT, SFAM, IPEC, ATMI, UTEK, PLAB and CYMI to name a few: techstocks.com And so there is relative excellent valuation in this sector and the MMers lowering their bids and portfolio managers have been dumping their shares for no good reason if you believe that small caps in this sector will achieve at least their peak valuations in this sector at the peak of the next cycle. An argument can be made that the big caps will crush the small caps in the eyes of the market and the disparity will continue and it is better to stay with the large caps. bUt that argument fails if you consider that some of the smaller players do not compete with the big boys at all because they are niche companies. Go diversified among the two groups and reduce your risk to this happening to your portfolio. Look for continued weakness tomorrow, especially in the lithography food chain (PLAB, DPMI, CYMI, ASMLF, SVGI) as ETEC preannounced tonight after the close. Put this in combination with the end of the quarter and there should be some good value in this sector when the market opens.