Shakespeare on Semiconductors: Sail With the Tide

"There is a tide in the affairs of men, which, taken at the flood, leads on to fortune; Omitted, all the voyage of their life Is bound in shallows, and in miseries. On such a full sea are we now afloat; And we must take the current when it serves, or lose our ventures." (Julius Caesar, Act IV, Scene 3: Within the tent of Brutus)

I'm surprised that no one is mentioning the DRAM Index which has been steadily improving (+4% in the last month) - even as the prices of memory stocks have plummeted with the general market. Chip stock prices are usually the last to move when a change in the semiconductor tide is upon us. It is easy to see why. The washout from the previous downturn has been so severe that investors are gun-shy. (Memory spot prices have dropped 87% in the last 16 months, rivaling the previous chip recession in 2001. Micron (MU) is at 15 year lows.)

The indicators move first, then the recognition of a change in tide, then the stocks. I might be early here (by a couple of months), but I know for certain I am not too late, and certainty is important in this business.

If you've ever been to the ocean at high tide - just before a change of tides - you'll notice a muddying of the waters, a turbulence, an "unclarity" - as the peak of one movement gives way to the victory of the receding waters that pull the water-line (and hence the waves) farther and farther out to sea.

In the old days, the sailors "sailed with the tide" because it would "pull" their boat effortlessly into the deep blue and off they sailed. You might consider this in the midst of the current downturn - and if not consider it - at least remember it in the weeks ahead. Kulicke and Soffa Industries (KLIC) is one of the largest holdings in my model portfolio, along with Qimonda (QI and the ETF from Proshares Ultra Semiconductors (USD).

Comments

[PeterB:]

Your quote was misquoted by the old Intersil ("There are tides in the affairs of man...") as an advertisement for DRAMs, at a time when the company was offering an obsolete product line (32k instead of 64k, as I recall). I always thought that any engineer who knew their Shakespeare would find it as funny/sad/ironic as I did, since the company was clearly in the "omitted" group on that product line. Luckily I was working on Analog products, where we were taking the tide.

2008 Jan 15 06:18 PM