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Wednesday, February 11, 2009

A little more material on Applied Materials (AMAT)

A couple of things stuck out on the call.  First off, about a quarter of a billion dollars of orders fell out of the order book because its been there more than 12 months.  Orders, typically the driving force of semicap company stock prices, are a really poor indicator of future demand trends over the long-term.  Using them seems completely at odds with long-term forecasting, which is what you need to do to buy heavy cyclical stocks like AMAT.  Stock picking is more about perceiving future perception than anticipating future reality.

Solar orders were much weaker than expectations and the company indicated thin-film customers are having difficulty securing financing for future projects.  Near-term, I still believe solar is vulnerable as existing projects are hitting snags due to the credit crunch.  The stimulus package may loosen this market up in the future but that may take quite some time.

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