Re: [CANSLIM] Bulkowski re: patterns besides C&H

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Bulkowski re: patterns besides C&H
Date: Wed, 9 Jan 2002 11:02:39 EST
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Canslimmers:

     I thought the forum would be interested in an interesting article that=20
appeared in IBD today.  It corroborates what Katherine suggests, viz. that=20
the economy is improving. =20

jans

INVESTOR'S BUSINESS DAILY, Wednesday, January 9,  2002, Economic Indicators=20
Look Good For Tech, Some Analysts Say, BY ANTONIO A. PRADO

New sales and inventory data point to a potential tech rebound, some=20
economists and analysts say.

Sales of chips and other electronic components are ticking up. More than=20
that, while those sales are rising, inventories are falling.

So when enough excess inventory is cleared off shelves, output can once agai=
n=20
ramp up.

"Even with (just small) growth in end-market consumption, shipments can now=20
grow impressively," said Arnie Berman. He's an analyst at SoundView=20
Technology Group Inc., an investment banking firm in Old Greenwich, Conn.

Berman says sales at the typical tech company that keeps its goods in its ow=
n=20
warehouses fell 12% from March through September, when you account for the=20
inventory correction process. It was nearer 30% for the chip sector, he adds=
.

Inventory correction occurs when producers or vendors shed excess stockpiles=
=20
during a slowdown, usually selling goods at low prices.

Economists say when the process and the fire-sale mentality that often comes=
=20
with it is over, companies face less pressure to keep prices down. And highe=
r=20
prices for goods =E2=80=94 a factor of lower inventories =E2=80=94 is bullis=
h for tech=20
earnings.

Among the signs of a possible pickup are rising prices of dynamic random=20
access memory chips. DRAMs, the most prevalent type of memory, are found in=20
most PCs, says economist Ed Hyman, chairman of International Strategy &=20
Investment Group Inc., a New York research firm.

In a recent note to clients, he points out that prices of DRAMs have surged=20
nearly 200% from their November low to $3.38 for a 128-megabyte chip. They=20
rose 26% in a single day - Jan. 2.

DRAM prices are often held as the new economy's equivalent to old economy=20
commodity prices measured by the Commodity Research Board, or CRB, index.

"The aggressive inventory liquidation is likely nearing an end," said Debbie=
=20
Johnson, senior economist at Deutsche Banc Alex. Brown.

But she cautions that DRAM and other chip prices still aren't near where the=
y=20
were when the economy was growing at a white-hot pace. DRAM prices hit almos=
t=20
$42 in March 1999. "Sales are showing signs of bottoming," Johnson said.

This gives companies a chance to raise prices, she notes. She also points ou=
t=20
that "prices remain at low levels."

Hyman notes that the book-to-bill ratio for electronic equipment rose to 0.9=
4=20
on a three-month-average in November.

That means there were $94 worth of new orders booked for each $100 of curren=
t=20
sales billed. The ratio fell below 0.92 last in the summer vs. 1.1 in=20
mid-2000. That was the highest level since at least 1993.

Meanwhile, electronic equipment inventories plunged 16% in November from=20
February, which had been at least an eight-year high. From November 2000 to=20
November 2001, those inventories have fallen 11.7%.

On the overall economy, Hyman looks at a number of factors. In the week of=20
Dec. 31, he saw 19 signs of economic strength vs. 15 signs of weakness.

He says that when the fortunes of companies improve in general, that often=20
leads to a boost in their capital spending. More than a third of U.S.=20
corporate capital spending is on information technology, says the Commerce=20
Department. That's up from just 12% as recently as 1987.




In a message dated 1/8/2002 1:22:42 PM Eastern Standard Time,=20
kmalm@earthlink.net writes:

<< Earnings estimates and growth rates have been coming down, prices have=20
been coming down, every stock gets punished, most every stock gets its=20
outlook revised downward, all stocks in all "previously overvalued"=20
industries all get hit. But, there are plenty of stocks in this shape that=20
were hit too hard, their earnings outlook is now improving, the economy=20
appears to be turning around, and in certain cases, these stocks have strong=
=20
competitive advantage, strong products/services, and more importantly strong=
=20
balance sheets. This is a long winded way to get here....but if the earnings=
=20
growth estimates have been slashed too low, then the prices have been slashe=
d=20
too low. I'd say the next move for these kinds of stocks is up, and in some=20
cases, it will actually precede the earnings evidence. >>

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