This is McDonald Scarman and these are the days
of our lives (laaa-laaaa).
(sing it with me
with hands like that of a orchesrta coordinator)
la-la, la la la la,,,,,la la la la la la,,,la-la la-la
err however the hell it goes -enough of this
With we have here is a lack of direction.
The whole freakin market is like a duck in the pond
with no particular place to go. What we all need is
some catalyst to spark a rally. So I nominate Mr C (no
not the guy in Happy Days) I'm talking about Al
Chemist to wave the bullish Wall Street flag to motivate
those fat-butt investors and get this market
I thought it was a good buy when I bought it at
23. Ever since then, it's been falling down.Thanks to
SSB Joseph's great downgrade of the SC industry.
Hopefully the down trend is over. You know as well as I do
that these Institutions help eachother out. Most
analysts are expecting the SC industry to be solid well
into 2001. Hang on.
Might be wisfful thinking on my part
but I am smelling a bump up. Check out after hours
I got it wrong yesterday p.m., suggesting we'd
perhaps get a minor pop up today (though I wasn't
confident the overall slide was quite over yet). Here is
someone who got it right on, back on
Definitely worth a read----looking back then at the 200 day
moving average of AMAT, his "bellweather" semi stock, to
suggest a base. We would appear to be about 1-2 trading
days away from that point.
A rash of margin
calls that will hit in the next day or so....no real
silver lining right now (which is when one should the
stock of good companies). Some of my favorite chips,
e.g., CREE, have lost 1/3 of their value in just the
last 10 trading days (i.e., down about 45 points). The
moose's butt presently feels like it backed into a wasp
Q: How about one you still like? A: Alliance
Semiconductor. They make memory products, SRAM and DRAM, used in
cell phones, PC servers and Internet infrastructure in
both computers and communications. They sell to 3Com
and Lucent and those kinds of folks. A lot of their
competitors, like Cypress, are capacity-constrained right now.
That is providing those who aren't with a lot of
upside potential. Q: Isn't everybody outsourcing? A:
Alliance is in a unique position. They have a meaningful
ownership in a fabricating plant in Taiwan called UMC,
which gave them the right to book capacity in advance.
That's the reason they made the investment; they
anticipated the potential shortage. Its earnings are in the
process of exploding as average selling prices rise and
gross margins expand. What else is interesting about
the stock is that it has got more than its current
stock price in the value of its portfolio of publicly
traded shares. Q: It has a venture-capital side to it?
A: It has 850,000 shares of Vitesse, a $59 stock. It
has 283 million shares of the UMC fab, whose ADRs
trade at $3.50 a share. It has 2.1 million shares of
Chartered Semiconductor, whose ADR trades at 67. It has
490,000 shares of Broadcom at $174. The total value of
the investments is around $1.25 billion. With 43
million shares outstanding that's about $29 in value in
the investments alone. Yet Alliance is trading at 19
1/2 a share. That's fine and well, but in and of
itself it would not attract us to the story. We care
about surprises. They have little analyst coverage,
their current backlog is $74 million, which is about
two quarters worth and double the last quarter's.
They are going to see sequential revenue growth of
20%. The consensus estimate for the calendar year is
44 cents a share and we think that's laughably
conservative. My guess is they come in north of 60 cents a
share. If you get any kind of reasonable multiple, and
we're not talking about a bull-market-crazy
semiconductor-multiple but, say, 25 times something that is growing,
that 60 cents a share gets you $15 on top of the asset
value of $29, and you get an incredibly conservative
operating business valuation of $44 a share. Q: What's the
market cap on this? A: About $800 million. This is
probably as down market as we will go on market cap. But
the value of the investment portfolio alone is $1.25
billion, and combined with a 25 multiple on operating
earnings you are up to $2 billion.