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Taking Stock: the best in tech stocks for 2007.

Posted on: 08-Jan-2008

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A summary of the January 7, 2008 Chip Insider®

 

Taking Stock: The good news was that Chips finally whooped Coffee, after many soggy years.  Stock Watch: Nikon

 
It rained on the chip making stock parade over the entire holiday, closing a miserable fourth quarter and year for that matter. Then again, we did warn it would prove to be a tough year for equipment stocks in January. There was good news . . . The big one was that Chips finally whooped Coffee, after many soggy years. This is our first Taking Stock of the year, so you’ll note that we have reindexed everything to 100 to kick off the New Year. So let’s go through the numbers:

 
It was a bad week at the chip café. Coffee continued to be too weak to defend itself while Chips were soggy. VLSI’s trademark Chips-to-Coffee ratio (the ratio of Intel’s to Starbucks’ PEs) fell back to 1.04 after ending the year at 1.10.  Intel’s PE slipped back three points to 22, while its stock price dropped 15%.  But the coffee was also as weak as tea, with Starbucks’ stock price falling 10% and its PE off two points to 21.

 
Indices of VLSI’s Favorite Stocks*

                                    1/7     12/31    12/24     12/17    12/10     12/3    11/26    11/19

Chips-to-Coffee       1.04      1.10      1.06      1.03      1.02      0.93      0.90      0.85       

Chip Stocks             93.1    100.0    100.9    102.3    105.4    101.2    100.4    102.8                    

Equipment Stocks    93.0    100.0    101.2      99.3      99.2      97.3      93.0      95.5        

HT2º Stocks             94.0    100.0    100.2      99.2    101.3      98.2      95.0      99.7

S&P 500                  95.5    100.0    100.4      99.3    101.8    100.2      97.4      98.7        

 

* The stock indices are indexed to 100 at the beginning of the year. So 108 means that the index is up 8% for the year. Chips-to Coffee is the ratio of Intel to Starbucks Stock Price-to-Earnings (P/E) ratios.  The P/E ratios are based on Friday’s close divided by earnings per share for the most recent four quarters.  Forward P/E ratios are calculated using the estimates for the next year published at Yahoo Finance.  It is intended as a quick measure of how investors view the health of the chip industry relative to the trendy side of the old economy, with the view that by taking a ratio of the valuations of the leaders is an approximation of this.  Both companies are the leaders in their areas as well as being leading edge in product delivery.

 

It was a tough week for tech.  The S&P 500 soundly beat chip making by only dropping 5 points, The VLSI Equipment stock index dropped 7 points, as did the chip stocks. VLSI’s HT2 Indexº fell 6 points — all three are substantially underwater after just one week into the New Year.

 
So, were should you have had your money in 2007? It wasn’t Coffee, or Starbucks, which was off 43% for the year. Chips, or Intel, was up 32% for the year and was one of the best stocks you could have owned. Overall, the average Chip Making stock was down 1.1% in 2007. Aixtron was the best, with a 226% gain, followed by Nextest and Nikon. The next three were Verigy, ASE Test, and Intel. The most consistent  hot stocks, or companies that were above average in each of the four quarters, are highlighted in red. Red because these were red hot: Aixtron, ASE Test, and Texas Instruments.  So, while it was a difficult year, there were some spectacular gains to make.

 

Hi-Tech Stock Gains

Equipment Stocks

Stock Price Change

1Q07

2Q07

3Q07

4Q07

12 Mo

Aixtron

60.5%

22.4%

11.4%

81.8%

226.0%

Applied Materials

-0.7%

8.5%

4.2%

-21.5%

-3.1%

ASM International

5.9%

20.4%

7.1%

-21.4%

9.9%

ASML

0.5%

10.9%

19.7%

-4.9%

28.3%

FEI

36.7%

-10.0%

-3.2%

-18.1%

-5.5%

KLA-Tencor

7.2%

3.1%

1.5%

-24.3%

-2.1%

Lam Research

-6.5%

8.6%

3.6%

-25.4%

-14.0%

Nikon

-4.8%

38.4%

14.8%

1.7%

48.3%

Novellus

-7.0%

-11.4%

-3.9%

-9.8%

-19.6%

Oerlikon (Unaxis)

22.5%

-11.8%

-34.4%

4.9%

-21.5%

Semitool

-2.3%

-26.1%

0.9%

-18.5%

-33.6%

SEZ

5.5%

-5.9%

-28.2%

35.5%

1.3%

TEL

-12.2%

10.2%

-19.8%

-23.1%

-26.9%

Ultratech

9.1%

-2.1%

4.0%

-25.5%

-8.4%

Varian Semiconductor

17.3%

12.6%

33.6%

-39.2%

21.6%

Veeco

4.1%

6.4%

-6.6%

-19.3%

-8.9%

 

 

 

 

 

 

Advantest

-22.3%

-1.9%

-29.1%

-27.2%

-51.1%

Credence

-36.3%

8.8%

-14.2%

-23.8%

-51.5%

Nextest

24.2%

-2.4%

-5.9%

77.2%

76.5%

Teradyne

10.6%

6.3%

-21.5%

-36.5%

-29.9%

Verigy

32.2%

21.9%

-13.6%

-6.9%

48.2%

 

 

 

 

 

 

ASM Pacific

6.5%

22.9%

21.5%

-19.4%

31.6%

BESI

9.6%

0.7%

-8.5%

-6.8%

-9.5%

Kulicke &Soffa

10.1%

13.2%

-19.0%

-31.6%

-18.6%

 

 

 

 

 

 

Semiconductor Stocks

1Q07

2Q07

3Q07

4Q07

12 Mo

AMD

-35.8%

9.5%

-7.7%

-51.9%

-64.0%

Analog Devices

4.9%

9.1%

-3.9%

-21.0%

-4.0%

ASE

5.5%

14.6%

-20.6%

-8.0%

-11.7%

ASE Test

12.8%

23.6%

2.1%

21.3%

40.8%

Chartered

13.8%

-7.7%

-15.5%

-7.5%

-20.7%

IBM

-3.0%

11.7%

11.9%

-13.3%

13.3%

Infineon

11.0%

6.2%

3.9%

-28.7%

-16.5%

Intel

-5.5%

24.1%

8.9%

-12.0%

32.1%

Matsushita

0.0%

-1.4%

-6.4%

12.6%

1.1%

Micron

-13.5%

3.7%

-11.4%

-44.1%

-47.9%

Samsung Electronics

-8.2%

0.5%

1.6%

-8.8%

-9.3%

SMIC

7.5%

-0.4%

-13.1%

-18.4%

-21.6%

STM

4.3%

-0.1%

-12.7%

-24.0%

-21.8%

Toshiba

1.5%

36.6%

-0.2%

-23.3%

8.0%

TSMC

-1.6%

3.5%

-9.1%

-10.0%

-9.4%

Texas Instruments

4.5%

25.0%

-2.8%

-10.8%

16.3%

UMC

-8.9%

7.5%

5.0%

-4.8%

0.0%

 

 

 

 

 

 

Other Chip Making Stocks

1Q07

2Q07

3Q07

4Q07

12 Mo

ESI

-4.5%

8.1%

15.2%

-20.6%

-0.7%

SOITECº

-33.7%

-11.5%

-16.8%

-44.8%

-69.8%

Synopsys

-1.9%

0.8%

2.5%

-9.5%

-3.2%

 

 

 

 

 

 

Starbucks

25.4%

-16.3%

-0.2%

-34.3%

-43.2%

S&P 500

0.2%

5.8%

1.6%

-4.2%

4.2%

 

 

 

 

 

 

Average CM Stock:

2.7%

7.0%

-3.5%

-12.0%

0.0%

Top 4-6 Bar

17.0%

22.5%

11.0%

4.0%

32.0%

Top 3 Bar

30.0%

25.0%

19.0%

34.0%

48.3%

 

 

Stock watch: Nikon’s stated philosophy is “Trustworthiness and Creativity.” Founded in 1917, Nikon is one of the world’s most prestigious optics companies today, with a name that is synonymous with quality. Nikon burst onto the chip equipment scene in the early nineteen-eighties. It was the earthquake that kicked off the quality revolution in this industry. For more on the history of this company, click on The Chip History Center. The story for the stock is: 1) it owns a large chunk of the digital camera business, and 2) it is the world’s second largest stepper manufacturer. As a stock, it is a triple play on consumer electronics, digital photography, and semiconductor lithography. The company has engineered a masterful transition from film to digital, where most have tripped up. It arguably has the best line-up of Digital SLRs on the market today — something it was well behind in ten years ago. It’s also been extremely aggressive with a new line-up of lenses designed to take into account the unique differences of digital imaging chips. Its small chip size gives it economic advantage as well. In steppers, Nikon is a clear leader in what has turned into a duopoly. The current management is very strong. Kazuo Ushida, President of Precision Equipment Company is young and dynamic and reminds me more of Shoichiro Yoshida, who built the group so famously in the eighties, than the classic Japanese director. For more research:  Nikon\'s ticker is 7731 on the Tokyo Stock Exchange.  If you’re planning a visit, here is the link to Google Maps — 080107.

 

 

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