Investment Opinion
FOOL PLATE
SPECIAL
Book-to-Bill Follies
The Semiconductor Industry Association releases its monthly book-to-bill figures today, unless they choke and delay the number, as often happens. Whereas only a few months ago this would have had the entire investing world ablaze with interest and putting out estimates, people are now starting to pay no mind to this number. Although I personally have long held that the measure of orders booked versus orders shipped has limited value as it measures dollar volume and not unit volume, the fact that other people have stopped caring about it is rather significant to this Fool.
The book to bill ratio will come in below 1.0 -- of this I am absolutely sure. The latest report of SRAM pricing that I pulled out of John Marren's recent report on INTEGRATED SILICON SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ISSI)") else Response.Write("(NASDAQ: ISSI)") end if %> as well as continued pressure on 4 meg and 16 meg DRAM pricing guarantees that about half of the chips shipped in the last month had sticker prices 50% to 90% below what they were only six months ago. For instance, 3 volt synchronous 32Kx32 SRAM hang below $5 now, compared to $20 in the fourth quarter of 1995 -- a 75% price drop in all of six to nine months. It takes a while for 15% to 20% annualized growth in volume to make up for 75% drops in price.
That said, valuations on semiconductor issues are starting to get really interesting. Knowing that revenue growth from the bottom of the semiconductor demand cycle to the top is usually extreme, an investor looking for double-digit topline growth over the next 18 to 24 months might consider some of the companies trading at low price /sales ratios, low price/research ratios and high working capital to market capitalization ratios. (Long time investors will realize this is classic Ken Fisher criteria with a Ben Graham-esque liquidity screen added on for fun.) Picking strong management with strong products and an ability to market them well would further enhance this picking. Look for more thoughts on specific companies in this space over the next few weeks.
IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> rose $1 3/8 to $45 1/4 this morning after early reports suggested that Hambrecht & Quist had upgraded its numbers for the manufacturer of removable hard drives after exiting the quiet period that followed the company's latest equity offering.
Prudential rated LECROY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LCRY)") else Response.Write("(NASDAQ: LCRY)") end if %> a "strong buy" this morning, boosting the shares $2 to $21. Prudential was the lead underwriter of the company's initial public offering (IPO) last year.
REPUBLIC ENVIRONMENTAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RESI)") else Response.Write("(NASDAQ: RESI)") end if %> remains strong after its two-for-one split on Friday, rising $5 1/4 to $35 1/4 today on no news.
Hospital supply concern ARROW INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ARRO)") else Response.Write("(NASDAQ: ARRO)") end if %> finally began to recover this morning, climbing $2 to $29 after it was trounced last week when it warned that third quarter results would come in below expectations.
SYBASE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYBS)") else Response.Write("(NASDAQ: SYBS)") end if %> announced an agreement with NETSCAPE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %> to provide integrated solutions to the Internet market, boosting shares of the database concern $1 1/8 to $24.
Robertson Stephens initiated coverage of MAIL BOXES, ETC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MAIL)") else Response.Write("(NASDAQ: MAIL)") end if %> with a "long-term attractive" today, causing shares to rise $1 3/8 to $20 3/8. Analyst Susan Lacerra noted that only 17% of the total market for retail mail services has been penetrated.
TOWER SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TSEMF)") else Response.Write("(NASDAQ: TSEMF)") end if %> got hosed today after the Israeli semiconductor manufacturer announced the end of a wafer purchase pact with HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>. The stock plummeted $3 3/4 to $10 1/4.
SYNALLOY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYNC)") else Response.Write("(NASDAQ: SYNC)") end if %> announced last night that second quarter earnings would not meet analyst expectations, and dropped $2 1/4 to $17 1/2 today; the specialty chemical and metal concern did not see the normal seasonal demand in textile dye.
Randy Befumo (MF Templar), a
Fool
Selena Maranjian (MF Selena),
another Fool
Transmitted: 06/05/96