Below is a chart of Applied Materials (AMAT) from 1981 to 2019 reflecting the year-over-year (YoY) percentage change.
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Category Archives: amat
Applied Materials 10-Year Targets
Below are the valuation targets for Applied Materials (AMAT) for the next 10 years. Continue reading
Nasdaq 100 Watch List: May 2016
Performance Review
Below is the one year performance of the stock on our watch list from May 8, 2015:
| symbol | Name | 2015 | 2016 | % chg |
| GRMN | Garmin Ltd. | 45.94 | 42.25 | -8.03% |
| FOSL | Fossil Group, Inc. | 79.62 | 27.83 | -65.05% |
| KLAC | KLA-Tencor Corporation | 59.8 | 72.7 | 21.57% |
| FOXA | Twenty-First Century Fox | 32.79 | 28.85 | -12.02% |
| NWSA | News Corporation | 15.14 | 11.93 | -21.20% |
| AMAT | Applied Materials, Inc. | 19.69 | 24.28 | 23.31% |
| NTAP | NetApp, Inc. | 35.65 | 25.45 | -28.61% |
| SNDK | SanDisk Corp. | 67.72 | 76.18 | 12.49% |
| MU | Micron Technology, Inc. | 27.18 | 12.63 | -53.53% |
| FAST | Fastenal Company | 42.72 | 45.99 | 7.65% |
| ALXN | Alexion Pharmaceuticals | 163.02 | 151.12 | -7.30% |
| WYNN | Wynn Resorts Ltd. | 117.84 | 96.81 | -17.85% |
| DTV | DIRECTV | 89.38 | 93.55 | 4.67% |
| DISCA | Discovery Communications | 31.33 | 27.88 | -11.01% |
The performance of the Watch List from last year averaged a loss of –11.06% which was well below the Nasdaq 100 Index change of +1.71% over the same period of time. The stock that gained the most was Applied Material (AMAT) while the stock that declined the most was Fossil Group (FOSL) with a loss of –65.05%.
Analysts were able to accurately forecast the general direction of 71% of the watch list stocks, a fairly high level of success not normally seen.
Chip Sector Cycle Says Sell
On December 6, 2012, we said the following of our Nasdaq 100 Watch List:
“We’ve highlighted the chip sector stocks to put emphasis on the fact that, as an industry group, the sector may be at or near a low.”
After a year and a half, the chip sector stocks have achieved all that we had anticipated when we wrote about them in late December 2012. As seen in the chart below, all of the stocks except Altera (ALTR) achieved gains that beat the Nasdaq Composite growth of +46.22% in the same period.
The chip sector does run on a cycle and it is our belief that while this may not be the top it is time to sell the principal in those stocks that have had a decent run. The profit portion should be allowed to compound until new relative lows are achieved.
We’ve been fortunate to successfully identify two chip sector cycles lows on March 20, 2010 and December 6, 2012. As we have in the past, we will notify subscribers of investment opportunities at the next cycle low. Investors may want to consider rotating into sectors that we’ve identified as worth accumulating using the proceeds from the sell of chip sector stocks.
Applied Material Analysis on the Mark
On March 23rd of this year we went into detail with our individual analysis of Applied Material (AMAT) in an article titled “Research Request: Applied Material (AMAT).” At the time, Applied Material (AMAT) was trading at $13.24. In a section of the article titled “So What Would We Do?” we outlined our investment strategy on Applied Material.
Although we didn’t think that Applied Material (AMAT) was a “buy” at the time, we did give steps on how to go about buying the stock. The last paragraph of the article said the following:
“For anyone who believes that this is an opportunity that can't be missed, I recommend allocating 15% of your portfolio into this name. On top of that, do a two part purchase. First buy 7.5% now and if the shares fall another 20% buy the remaining 7.5% later. This way, the cost basis of the stock would require only a 10% rise to break even. Again, it is not likely that we'll buy AMAT since the alternatives provide exceptional opportunity with less downside risk.”
Based on the two-part purchase strategy that we mentioned, the average purchase price would have been $11.92. The gain for the stock would be 17.45% so far. Had only one purchase been made based on a decline of 20% from the $13.24 level, the total gain would be 32.20%.
We hope that our work on this topic has proven to be profitable for those who regularly read our site. For those who have taken advantage of this investment opportunity, please re-read our March 22nd and March 23rd postings for indicated upside resistance levels and potential exit points.
Nasdaq 100 Watch List
Watch List Summary
At the end of the week for September 17, 2010, the top performing stocks from our Nasdaq 100 list for August 15, 2010 are Oracle (ORCL) with a gain of 21.27%, Qualcomm (QCOM) with a gain of 12.07% and Computer Associates (CA) with a gain of 11.57%.
The worst performing stocks from our August 15th watch list are Intel (INTC) down –1.78%, Applied Materials (AMAT) down –1.34% and Activision (ATVI) down –0.46%.
The average gain for the watch list was 6.33%. Of the two stocks that we pointed out as being standouts from August 15th, Garmin (GRMN) exceeded the average return by climbing 9.57% while Paychex (PAYX) underperformed the average gain by rising 3.92%.
A distinction that needs to be made between this week’s list and our August 15th list is that we’ve ranking the companies on this list by those stocks nearest their 52-week low. Our previous list was ranked by those stocks that had the highest dividend yield and within 20% of their respective 52-week low.
Performance Review
The following is a total return (appreciation plus dividends) performance review of our Nasdaq 100 Watch List from September 11, 2009:
- Stericycle (SRCL) up 44.48%
- Genzyme (GENZ) up 25.54%
- Pharmaceutical Product Development (PPDI) up 20%
- Cephalon (CEPH) up 5.92%
As a group, the average gain for the stocks mentioned was 23.99%. This is contrasted by the Nasdaq 100 gain of 16.07% in the same period of time.
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| *chart does not reflect dividend reinvestment for PPDI |
Nasdaq 100 Watch List
Below are the Nasdaq 100 companies that are within 20% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.
| Symbol | Name | Price | P/E | EPS | Yield | P/B | % from Low |
| PAYX | Paychex, Inc. | 25.95 | 19.67 | 1.32 | 4.80% | 6.67 | 5.27% |
| INTC | Intel Corporation | 18.81 | 11.26 | 1.67 | 3.40% | 2.3 | 6.87% |
| AMAT | Applied Materials, Inc. | 11.02 | 24.44 | 0.45 | 2.50% | 2.03 | 7.33% |
| YHOO | Yahoo! Inc. | 13.89 | 22.77 | 0.61 | N/A | 1.59 | 7.34% |
| MXIM | Maxim Integrated Products, Inc. | 16.91 | 41.86 | 0.4 | 5.00% | 2.15 | 7.91% |
| GILD | Gilead Sciences, Inc. | 34.56 | 10.47 | 3.3 | N/A | 4.58 | 8.93% |
| ATVI | Activision Blizzard, Inc | 10.82 | 41.94 | 0.26 | 1.30% | 1.21 | 8.96% |
| DELL | Dell Inc. | 12.45 | 15.74 | 0.79 | N/A | 3.92 | 9.80% |
| RIMM | Research In Motion Limited | 46.72 | 10.24 | 4.56 | N/A | 3.2 | 9.85% |
| AMGN | Amgen Inc. | 55.22 | 11.73 | 4.71 | N/A | 2.28 | 9.87% |
| DISH | DISH Network Corporation | 18.77 | 11.26 | 1.67 | N/A | N/A | 10.02% |
| CSCO | Cisco Systems, Inc. | 21.86 | 16.46 | 1.33 | N/A | 2.82 | 10.31% |
| XRAY | DENTSPLY International Inc. | 30.66 | 16.55 | 1.85 | 0.70% | 2.6 | 10.45% |
| MSFT | Microsoft Corporation | 25.22 | 12 | 2.1 | 2.10% | 4.76 | 10.95% |
| SPLS | Staples, Inc. | 19.49 | 17.26 | 1.13 | 1.80% | 2.2 | 11.69% |
| PDCO | Patterson Companies Inc. | 27.15 | 14.67 | 1.85 | 1.50% | 2.3 | 12.52% |
| SHLD | Sears Holdings Corporation | 66.83 | 27.38 | 2.44 | N/A | 0.9 | 12.87% |
| GOOG | Google Inc. | 490.15 | 21.29 | 23.03 | N/A | 3.77 | 13.03% |
| LIFE | Life Technologies Corporation | 46.51 | 29.91 | 1.56 | N/A | 1.97 | 13.16% |
| STX | Seagate Technology. | 11.16 | 3.55 | 3.14 | N/A | 1.95 | 13.41% |
| FLIR | FLIR Systems, Inc. | 27.24 | 18.52 | 1.47 | N/A | 3.25 | 13.50% |
| GRMN | Garmin Ltd. | 29.64 | 8.95 | 3.31 | 5.10% | 2.21 | 13.52% |
| TEVA | Teva Pharmaceutical Industries | 53.48 | 19 | 2.82 | 1.20% | 2.48 | 13.81% |
| FLEX | Flextronics International Ltd. | 5.55 | 15.72 | 0.35 | N/A | 2.26 | 14.20% |
| COST | Costco Wholesale Corporation | 61.29 | 21.93 | 2.8 | 1.30% | 2.43 | 14.75% |
| HSIC | Henry Schein, Inc. | 56.35 | 15.82 | 3.56 | N/A | 2.31 | 14.77% |
| CERN | Cerner Corporation | 79.18 | 31.31 | 2.53 | N/A | 3.83 | 14.85% |
| CELG | Celgene Corporation | 55.25 | 29.99 | 1.84 | N/A | 5.11 | 15.06% |
| CA | CA Inc. | 20.44 | 13.43 | 1.52 | 0.80% | 2.02 | 15.48% |
| ERTS | Electronic Arts Inc. | 16.26 | N/A | -1.06 | N/A | 1.96 | 15.63% |
| VRTX | Vertex Pharmaceuticals Incorpor | 36.25 | N/A | -3.53 | N/A | 9.01 | 16.00% |
| KLAC | KLA-Tencor Corporation | 31.05 | 25.31 | 1.23 | 3.30% | 2.32 | 16.34% |
| STLD | Steel Dynamics, Inc. | 15.01 | 15.73 | 0.95 | 2.00% | 1.58 | 16.45% |
| WCRX | Warner Chilcott plc | 22.75 | 11.2 | 2.03 | N/A | 2.82 | 16.55% |
| LOGI | Logitech International S.A. | 15.39 | 22.57 | 0.68 | N/A | 2.68 | 16.86% |
| CEPH | Cephalon, Inc. | 62.26 | 12.48 | 4.99 | N/A | 2.09 | 17.36% |
| URBN | Urban Outfitters, Inc. | 34.11 | 22.19 | 1.54 | N/A | 4.26 | 18.85% |
| FWLT | Foster Wheeler AG. | 24.19 | 10.8 | 2.24 | N/A | 3.46 | 18.99% |
| FISV | Fiserv, Inc. | 53.56 | 17.16 | 3.12 | N/A | 2.57 | 19.55% |
| JBHT | J.B. Hunt Transport Services, I | 35.26 | 26.73 | 1.32 | 1.40% | 7.56 | 19.73% |
| CTAS | Cintas Corporation | 27.71 | 19.64 | 1.41 | 1.70% | 1.67 | 19.96% |
Research Request: Applied Materials (AMAT)
A research request is a response to our reader's question regarding Applied Materials: "Do you like AMAT? They just raised their dividend and seem close to an average low." Our team wrote a brief response with the article titled "Applied Material and the Chip Sector Should Be on Your Radar" but we'd like to take that analysis a little bit further.
This isn't the first time we've mentioned a company within the chip sector. Our original Speculative Observation on Mattson (MTSN) yielded more than 50% in less than 6 months. Since that write up, MTSN returned 65% while AMAT went nowhere and returned less than 1%.
In pursuit of "seeking fair profits" and being a rather conservative bunch, we had to issue a Sell Recommendation on MTSN at $3.32 on January 6, 2010. Part of our strategy is to constantly search for alternative investment opportunity with a lower risk profile and higher reward potential. With that in mind, you can see that MTSN has outperformed AMAT and the overall market by a wide margin, thus it is fair to say that risk/reward profile is now more favorable for AMAT than MTSN. So let's take a deeper look at AMAT.
Applied Materials (AMAT) is the largest supplier of semiconductor, flat panel display (LCD), and solar equipment according to VLSI Research. The company leveraged their knowledge in LCD market into the solar market in late 2008. There are many growth drivers for this company and the sector. On the chip side, you have China continuing to consume more and more electronics pushing demand for greater chips. LCD driver is coming from conversion from CRT TV to LCD. Solar may get a boost from Obama push for "greener" economy. Though sound bullish in arguments, these factors may already be in the price so we must look at the fundamental.
As of this writing, AMAT is trading roughly around $13.25. This is up considerably (100%+) from AMAT's December 2008 low of $6.24. The company began distributing cash dividends back in 2005 for the amount of $0.09. The current 2010 dividend payout is $0.28 which amounts to a 25% annual increase in dividend. It is expected the that growth rate of the dividend can't be sustain forever but we've taken this is as a positive sign of management's commitment to the shareholders. We at New Low Observer thinks true profits are obtained when a company shows cash rather than paper profits. The current yield of AMAT sits a little above 2% and is quite high on a historical basis. Average yield should be at 1.5%. Take that average yield and you arrive at a share price of $17.35. My proprietary model, which takes into consideration cash flow, earnings, book value, and yield, shows the following price targets:
-
Dirt cheap - $6.75 (we saw AMAT at $6.24 and rocketed up)
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Buy - $13.26 (we are in that range)
-
Fair - $17.35
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Over Value - $26.18
*my model changes over time so don't take these prices as static.
For technical analysis on AMAT, please refer back to the article "Applied Material and the Chip Sector Should Be on Your Radar".
So what would we do?
First, we look for other alternatives and stick to our rule of buying low (within 20% of the 52 week low). Because AMAT is 28% above the low, we will not chase it. Alternative investments may be in names like Qualcomm (QCOM) which is 15% above the low. If and when the price retraces on the downside, we'll re-evaluate the situation and may be compelled to buy more.
For anyone who believes that this is an opportunity that can't be missed, I recommend allocating 15% of your portfolio into this name. On top of that, do a two part purchase. First buy 7.5% now and if the shares fall another 20% buy the remaining 7.5% later. This way, the cost basis of the stock would require only a 10% rise to break even. Again, it is not likely that we'll buy AMAT since the alternatives provide exceptional opportunity with less downside risk.
For Research Request of companies on our most recent Watch Lists (only Dividend Achiever or Nasdaq 100), email our team here. We'll post only one research request each week.
Applied Materials and the Chip Sector Should Be on Your Radar
Based on our most recent Nasdaq 100 Watch List, the following question was asked regarding Applied Materials (AMAT): "Do you like AMAT? They just raised their dividend and seem close to an average low." Based on this question, We took a closer look at the chip related companies on our watch list and noticed that all of the companies started aggressive dividend increasing policies starting around 2002. This alone is a compelling reason to investigate these companies.
In our cursory review of data on Applied Material (AMAT) from Morningstar.com, we found that Applied Material (AMAT) is selling below the average Price-to-Book ratio over the last 10 years by 14%. Over same period of time, AMAT is selling 22% below the price-to-sales ratio. Finally, AMAT is selling 44% below the price-to-cash flow ratio.
All of these factors indicated that the stock should return to the mean at some point in the future. A glaring negative is the fact that there hasn't been the earnings to justify the stock price and dividend. Dow Theory also indicates that from the peak of $22 to the low of $7.80, AMAT is fairly valued at $14.90. So far the decline in the price from the $15 dollar level has confirmed the Dow Theory view.
However, the last time that AMAT had negative earnings was in 2003. The low in 2003 at $11.50 took the stock to the high of $25 in the same year. Additionally, AMAT didn't fall below $15 until the market decline in 2008, which seems natural given the state of the economy during that period of time (it might not be over yet.) This means that in any given year from 2003 to 2008, AMAT would have returned as much as 46% if based on the average low price of $15 and the average high price of $22.
An important point to consider about the technical pattern of AMAT is the double bottom that was achieved in late 2002 to early 2003. If AMAT were to replicate the same rally on a relative basis then AMAT could rise as high as $18.43, an increase of 43% from the current level. Already, investors are being compensated for 2% of the downside risk through the dividend if the stock were held for a year. As long as investors are willing to stomach the potential of going to the old low of $7.80 in November 2008 then there may be opportunity for this stock.
Our opinion is that the chip sector is ripe for mergers and acquisitions. In terms of AMAT, there are few downside risks if you're willing to accept the volatility and the losses that go along with such an investment. The aggressive dividend policy may pay off in the case of AMAT. However, for the time being, we would review the other chip-related companies with a dividend that has earnings before diving into AMAT.
Because this was a cursory review of AMAT in response to a question, we recommend that you verify all data before taking a position either long or short. We are considering a full review of the chip sector to be posted on this site in the future.
-Touc
Nasdaq 100 Watch List
Below are the Nasdaq 100 companies that are within 20% of the 52-week low.
| Symbol | Name | Price | P/E | EPS | Yield | P/B | % from Low |
| QCOM | QUALCOMM | 40.05 | 32.14 | 1.25 | 1.70% | 3.17 |
12.94%
|
| FSLR | First Solar, Inc. | 113.3 | 15.05 | 7.53 | N/A | 3.65 |
14.78%
|
| GILD | Gilead Sciences, Inc. | 47.87 | 16.96 | 2.82 | N/A | 6.7 |
15.88%
|
| ERTS | Electronic Arts Inc. | 18.42 | N/A | -2.31 | N/A | 2.33 |
17.32%
|
| ATVI | Activision Blizzard, Inc | 11.82 | 139.06 | 0.09 | 1.30% | 1.39 |
20.00%
|
This list is strictly for the purpose of researching whether or not the companies have viable business models or are about to go out of business. These companies are deemed highly speculative unless otherwise noted.
Nasdaq 100 Watch List Summary
This week, the top performing stock from last week's watch list was Genzyme Corp. (GENZ) which was up 4.36%. The worst performing Nasdaq 100 stock from last week was First Solar (FSLR) which fell -1.93%.
Below is the list of the highest yielding stocks that are components of the Nasdaq 100. This isn't an endorsement of the companies on the list. However, it is noted that the majority of the companies that pay a dividend are related to the chip sector. Clustering of companies in a specific industry may indicate that the entire sector is undervalued. If the companies have high dividend yields on a relative basis (compared to their historical high yields), then these companies may be worth considering despite the fact that they are not within 20% of the new low. Linear Technology (LLTC), ADP (ADP), and Paychex (PAYX) are Dividend Achievers as well as members of the Nasdaq 100 index.
Before pursuing any of these companies, be sure to verify the dividend history as well as the earnings capacity to pay the dividend (more commonly known as payout ratio).
| Symbol | Company | Price | P/E | EPS | Yield | P/B | % from low |
| MCHP | Microchip Technology | 28.25 | 31.6 | 0.89 | 4.80% | 3.53 | 43.69% |
| MXIM | Maxim Integrated Prod. | 19.14 | 71.69 | 0.27 | 4.20% | 2.31 | 48.49% |
| PAYX | Paychex, Inc. | 32.17 | 23.52 | 1.37 | 3.90% | 8.43 | 39.87% |
| LLTC | Linear Technology | 28.36 | 24.22 | 1.17 | 3.20% | N/A | 39.98% |
| ADP | ADP | 44.6 | 16.57 | 2.69 | 3.00% | 3.91 | 34.10% |
| INTC | Intel Corporation | 21.99 | 28.41 | 0.77 | 2.90% | 2.94 | 53.26% |
| PPDI | Pharma Prod. Dev. | 22.71 | 16.94 | 1.34 | 2.60% | 1.98 | 26.38% |
| XLNX | Xilinx, Inc. | 26.6 | 24.43 | 1.09 | 2.40% | 3.68 | 46.48% |
| AMAT | Applied Materials, Inc. | 12.49 | N/A | -0.07 | 2.20% | 2.37 | 23.91% |
| CMCSA | Comcast Corp. | 17.53 | 13.9 | 1.26 | 2.20% | 1.17 | 40.35% |
| KLAC | KLA-Tencor Corp. | 28.79 | N/A | -0.39 | 2.10% | 2.25 | 49.25% |
Email our team here.