Semiconductor Capital Equipment Stocks Discussion

» Felipe - Steve

I wish I had seen your post before finishing mine. You make a very good point about a sideways market and your ability to buy more at the same price. I hadn't thought of it that way.

It sounds like we're about the same age (I'm guessing here - did you watch Zorro, Superman and Leave it to Beaver as a kid?). I did, and yet I'm just starting to invest. I have always had all my money tied up in my own business but recently decided that I had to diversify my investment risk as I reach the half-century mark.

I've always controlled the outcome of my investments insofar as all my money was in my business. What's most difficult for me is relinquishing control to a management team I don't even know (be it mutual fund manager or the CEO of a company in which I'm investing).

I suppose it also doesn't help that I'm beginning my investment career in this year's volatile topsy turvy market.

The sooner I become more comfortable with these facts, the better!

-- posted by Felipe

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» SteveT - AMAT LSI

A couple good choices. (BTW I did grow up on those above mentioned shows, still watch Leave it to Beaver when I can) These have been great stocks over the past 3 years if you bought them right. They are volatile so buying at the right price is crucial. Then you have a cushion to hopefully prevent you from selling out in one of those panic down turns like we get from time to time. I am sure when Kirk checks in he can be of service to you about the technical stuff. I would say you should consider putting enough money into the sector to take meaningful positions in 3-5 stocks for diversification purposes, and don't be afraid to take profits. Often you can buy back more shares than you sold so you are better positioned when we get another up swing in the sector. Sounds to me like you got the knowledge it is just getting your feet wet.

-- posted by SteveT

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» Felipe - P.S.

Steve, I'm with you. I will only invest in companies that (1) are profitable, (2) have a strong balance sheet, (3) have a dominant market position or are trending toward that position.

For most investments, I add a 4th criterion: the stock has recently been beaten up for no good reason at all, or what I perceive to be a fleeting misstep that can be corrected in a matter of months.

Also, I'm as interested in low tech widget makers that have grown 15% a year ad infinitum as I am in micro-semi-optical-laser-genomic wizards. Any well-run business interests me.

I only once invested in a unprofitable startup. I'll let you guess what happened to that investment. I learned my lesson.

-- posted by Felipe

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» Felipe - Steve

You mentioned "putting enough money into the sector to take meaningful positions in 3-5 stocks". I've struggled with what that means on the front end, as you're investing. Two questions arise.

First, do you plunge into stocks that you think are "on sale", or do you DCA by buying 1/4 of your ultimate position each month over a 4 month period (as an example).

Second, I've read various advisors suggest amounts ranging between 3 and 5 percent as a maximum position in any one stock. I've been limiting my initial position to about 2%, even on stocks I really like. Does that seem reasonable, or would you go higher/lower. In this instance, I'm only talking about stocks that really look cheap and are fundamentally strong companies. If I'm less sure, I might start at 1/2 to 1% of my invesment capital (although 1/2% sometimes make me feel like...why bother).

Any thoughts?

-- posted by Felipe

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» JenL_2 - Semi Sector Comparison

Felipe - Here are a few charts for comparison - Applied Materials (AMAT), LSI Logic (LSI), Lam Research (LRCX), Semiconductor Index (SOX), Nasdaq ($COMPQ):

AMAT, LSI, LRCX, SOX, Nasdaq 1 MO Chart

6 MO Chart

1 YR Chart

3 YR Chart

5 YR Chart

.....Jen

-- posted by JenL_2

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» JenL_2 - Another Semi Stock Comparison

This from CNBC.com :

Semiconductor Sector Stock 1 YR Performance Comparison

You can choose different durations and sectors for comparison......Jen

-- posted by JenL_2

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» Felipe - Thanks Jen

The charting tools are helpful, particularly the "Stock Point" charting. Looking back 2-3 years, the curve suggests that semis have a tendency to be pulled higher, or pushed lower, each time they break below or rise above the NASDQ trend by a significant margin.

I have to admit that my eyes glaze over if I try to look at charts for more than 5 minutes. I'm glad there are persons that enjoy laboring over the charts (I'm sure there's useful information to mine there), but I'm also grateful that I don't make my living looking at those charts.

While I deal frequently with trends, charts and numbers in my work, I haven't applied that discipline to my investing. I use my limited time to look at business fundamentals.

Without a Cray supercomputer at my side to analyze myriad charts and ratios, I'm afraid I would be misled by (a) only seeing the pattern I was hoping to see, or (b) failing to examine charts that tell a different story from the charts I happen to be studying.

You mentioned Kirk - I reviewed several of his posts and am impressed by his insights and candor(I e-mailed him as you suggested). Technical analysis is probably one of the many professional disciplines he brings to his work for us "weekend" investors.

BTW, your site is certainly several cuts above others I've encountered in my exploration over the past several months. Congratulations to you and others at Suite101 on your great efforts -- it shows!

-- posted by Felipe

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» Kirk - Welcome to the group Felipe

I sent you my subscription information. I use that method to give prices to pay and other similar advice for individual stocks. My newsletter also includes a decent amount of research on this sector (Semiconductor capital equipment). I designed semiconductor products for HWP/Agilent in the Optical Communication R&D department for 20 years so I have somewhat of a clue about it. 8)

I don't give any individual stock advice here as this is a forum where we help each other educate ourselves and discuss ideas in a more general nature. Plus, I have to make a living somehow! 8)

I'd appreciate it if we could move the general investment discussio to Here: U.S. Stock Market - General Discussion/Q & A

I typically start an individual stock with 0.5% of my portfolio and then perhaps add more later.

-- posted by Kirk

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» Kirk - Chip-Equipment Stocks to Watch

Decent story from Frances Hong CNBC Technology Reporter

Highlights AMAT, KLAC, LRCX & VESA.

The story says the sector trades between 10 and 30 times forward earnings.

In a bearish market, the multiple is typically 10 times next year’s earnings.

Going forward, Bedekar says this is a "normal" but not spectacular market, which means the multiples should snap back to the low-to-mid 20s range.

It gives a low for a bear market of 10x next years earnings and says LRCX is now only 11x next years earnings.

-- posted by Kirk

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» JenL_2 - Thanks Kirk!

...very informative article on the semiconductor capital equipment sector.....Jen

-- posted by JenL_2

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