".... therefore, high P/E means a rising reported numbers down the road, and low P/E means a declining set of numbers down the road."
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brightness...
Or it could mean that the bubble mentality is still pretty much intact and the stock remains overvalued with a good deal of downside risk. I think that is the case, and Hickey is correct.
The view he takes is not pulled out of thin air and he backs his arguments with a lot of data based on how AMAT and others have traded in previous bear (and bull) markets. From my own experience, he is correct, and current valuations in most of the tech sector (as well as the market as a whole) are absurd and unsustainable from a historical standpoint - such valuations are those found in speculative bubbles, not in normal markets.
I agree that the chip and equipment space is cyclical - that is undeniable. As such, you are correct that frequently the time to sell is when P/E's are relatively low and the time to buy comes at points when the PE's are generally higher. However that is typically a result of other factors, not what determines the buy and sell decision itself, and cannot be the only criteria for buying and selling the stocks. Otherwise, the higher AMAT went here, the more you would want to buy - inherently unsound thinking for investing and the wrong answer. Would AMAT be a better buy right now if it were selling at the old high of $57????? I think not.
AMAT is in a sector (semi-equipment) that is fundamentally terrible with no signs of it getting any better by AMAT's own admission and confirmed by virtually every other company in the group. They are still laying folks off right and left and that means the bottom is not here. Yet folks with stars in their eyes keep jumping in and running the prices of these stocks back up at the slightest hint of a rally and totally ignoring the reality of what the companies are going through. Until that "irrational exuberance" finally dissipates or the fundamentals (earnings) begin to catch up with the price of the stock (that would take at least a couple of years), the stocks are all overvalued, quite risky, and should not be held.
Just my opinion, though.
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