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Thursday, July 13, 2006

Another Data Point Investor

By William Trent, CFA of Stock Market Beat

We recently expressed our amazement that sell-side analysts ignore widely available data in favor of chasing down the scuttlebutt from industry insiders. Here is the latest example:

Sector Snap: Chip Equipment Stocks Drop: Financial News - Yahoo! Finance

Semiconductor equipment stocks got socked in Wednesday afternoon trading after an analyst suggested the entire sector showed signs of peaking.

In a published note, Citigroup analyst Timothy Arcuri said that insight gleaned from the first day of a trade show seemed to suggest the sector has hit a “cyclical top.”

“Supply chain checks suggest most tool vendors have scaled back order or shipment forecasts for the calendar fourth-quarter by about 10 percent in the past few weeks,” Arcuri wrote in the note.

Of course equipment orders are not going to continue to be up 60 percent year/year, as they have been for the last three months. With end demand for semiconductors rising at a single-digit rate there is only so much manufacturing equipment they need. We said the same thing yesterday and didn’t have to travel to San Francisco and spend hours hobnobbing with management to figure it out. The supply chain doesn’t have to be checked - it publishes its sales figures every month for Pete’s sake. Oh, we also said it last week. And a month ago. And the month before that. In other words, back when you could have saved yourself some money by not buying, or made some by selling short.

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