It seems increasingly clear to me that investors really want the semiconductor rally to stay solidly in place. I say this because some highly-valued equipment companies, including ASML (ASML) and VAT Group (OTCPK:VACNY) (VAT.S), have certainly posted less-than-perfect quarters/guidance and the markets have largely shrugged it off. More typically, higher valuations mean higher expectations and you’d often see bigger hits to the stocks on these apparent stumbles.
VAT Group shares (the Swiss shares) have underperformed the SOX since my last update, but not enough to make it a clear-cut bargain just yet. I love the company’s strong share in vacuum valves – not commanding, perhaps, but well over 50% and well ahead of rivals – and I expect ongoing increases in vacuum intensity in future generations of chips. I’m comfortable with a premium valuation for special stories (ASML certainly fits), but I’d need to see a greater pullback from VAT before stepping up, particularly in light of weak guidance.
Investors should note that VAT Group ADRs have poor liquidity; the shares listed on the Swiss exchange offer much better liquidity and many brokers now make international trading relatively painless.
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