BOSTON, Nov. 19, 2003 (PRIMEZONE) -- Paul McWilliams of the pmcw Report (http://www.pmcwreport.net) has enjoyed quite run in 2003. Since its September 9, 2002 inception, his model equity portfolio has returned a staggering 294%, well outdistancing the Nasdaq's 44% gain. Year-to-date the portfolio's equity positions have returned 234%, compared to a 41% advance in the Nasdaq.
A semiconductor veteran of over twenty years, McWilliams has been advising members of his service to keep some "dry powder" available to take advantage of a "December dip" he is predicting in share prices.
Into 2004 he sees demand for semiconductors remaining strong giving select semiconductor players pricing power. This change to a "seller's market" could have big implications. "Since the semiconductor industry is loaded with high fixed costs and relatively low variable costs, profits will tend to increase significantly faster than sales. In other words, a 10% increase in sales might translate into a 15% or greater increase in profits."
Semiconductors make up 75% of his model portfolio. McWiliams recently commented on the following companies on his web site: "Dynamic Random Access Memory (DRAM) is the classic cyclical memory play. However, I caution investors who are considering getting into this area given the political and international trade issues. This applies to me even being comfortable investing in a company like Micron (NYSE: MU)."
Instead of DRAM McWilliams prefers the Static Random Access Memory (SRAM) space. McWilliams feels, "Cypress (NYSE: CY) is as well poised as any to leverage the coming recovery and wouldn't hesitate to build a position in the low $20s. Cypress has been hovering at the high side of the range where many employees who took out loans to buy stock in 2002. Many have already cashed out to cover their debt. This should free CY to take a run in 2004."
In the Flash arena he sees the usual Flash suspects benefiting including: Intel (Nasdaq: INTC), Advanced Micro (NYSE: AMD), Atmel (Nasdaq: ATML), STMicro (NYSE: STM) and Silicon Storage (Nasdaq: SSTI). "We mentioned Intel as an "investment idea" when it was trading at $17 and Silicon Storage when it was trading below $7."
McWilliams believes the small EEPROM (Electronically Erasable Programmable Read Only Memory) space is an appealing pure cyclical play. His favorite investment is Catalyst Semiconductor (Nasdaq: CATS). He recently established a small position in CATS in his model portfolio.
He continues to believe telecom spending will increase as part of a cyclical rotation. Specifically McWilliams sees both Vitesse (Nasdaq: VTSS) and PMC-Sierra (Nasdaq: PMCS) benefiting. "We recommended both as investment ideas for gains of 270% and 197% respectively." He warns that, "picking value entry points for the large telecom suppliers is very tough. We took a stab at it earlier this year and provided a good entry target for Tellabs (Nasdaq: TLAB), but got too greedy when calculating our target for Nortel (NYSE: NT) and didn't venture a guess at Lucent (NYSE: LU)."
McWilliams looks forward to taking advantage of opportunities in 2004, "our favorite way to make money in the market is to find undiscovered stocks and build positions long before these companies are recognized by the broad market."
Those interested in reading his detailed reports about the above companies and portfolio recommendations can sign up for a free thirty-day trial to his service: http://www.pmcwreport.net/join.php3?refer=PZ12
About the pmcw Report
The pmcw Report is a subscription financial newsletter managed by semiconductor veteran Paul McWilliams and Raging Bull co-founder Rusty Szurek. Members enjoy daily postings, economic updates and a model portfolio.
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