Wednesday, May 14, 2008

Why We Like Applied Materials even though it's down 2%. And Warren Buffett Stops By (AMAT; BRK.A)

They're a class act.
Over the years they've shown the ability to manage in an extraordinarily cyclical industry. They aren't going to surprise me with a chapter 11 tomorrow. CI has had 25 posts referencing AMAT.

We had three posts January 14-16:

Green energy's hottest stocks for 2008
Capacity Utilization for Solar Panel Suppliers at 0.46 for 2008 ...
Applied Materials sees solar mkt growing 30 pct/yr (AMAT)

because we figured our readers could make some money. As it turns out, we got lucky.
AMAT closed at $16.44 on the 14th ($16.64 on the 16th) and at $19.86 yesterday, 20.80% (19.58% since the 16th).
During the same period the Nasdaq went from 2478.30 to 2495.12 (7/10ths of 1%)*.

Here are some of the datapoints. From Infectious Greed last year:

Much-heralded -- and much-funded -- solar panel company Nanosolar seems to be going through some jarring high-level change. The $100m-funded company -- whose investors include Google's founders, Benchmark Capital, an Apax partnerPartners, and others -- no longer has the services of its chief scientist, Chris Eberspacher.

Why not? Because Eberspacher just joined Applied Materials:
Applied Materials, Inc. (Nasdaq: AMAT) announced today that Dr. Chris Eberspacher has joined the companys Solar Business Group to lead advanced R&D programs. In this new role, Dr. Eberspacher will lead efforts for both silicon and non-silicon based solar materials and will report to Dr. Winfried Hoffmann, chief technology officer of Applieds Solar Business Group. Before joining Applied, Dr. Eberspacher was most recently chief scientist at Nanosolar, Inc., a solar start-up focused on roll-to-roll processing of thin-film photovoltaic (PV) products.
[Update] After posting this I received a note from Nanosolar CEO Martin Roscheisen. He says that Eberspacher actually "disengaged" with Nanosolar "almost two months ago", well before joining AMAT. Martin went on to argue that Eberspacher's departure wasn't that big a deal, a point upon which we apparently disagree.

Here's AMAT's press release on the hire.
Going back to May '06:

Applied buys Applied and gets into solar this month
Applied Materials has signed an agreement to buy Applied Films for $464 million, a move that puts the world's biggest maker of semiconductor manufacturing equipment into the energy business....
-From cnet

In June 2007 Fabtech reported:

Applied Materials buys HCT Shaping Systems for US$475 million
Continuing its strategic focus on the solar cell manufacturing market, Applied Materials has made another major acquisition in the solar equipment sector with the purchase of Switzerland-based HCT Shaping Systems SA, the largest specialist in wafer sawing tools for both solar and semiconductor wafer markets....

Finally in November 2007:

Applied Materials Extends Solar Push
Semiconductor tools maker Applied Materials on Monday extended its push into alternative energy in a roughly $330 million deal to acquire Baccini, an Italian maker of test systems for the manufacture of crystalline silicon photovoltaic cells....
-Red Herring

That's $1.269 Billion and Nanosolar's Chief Scientist.

*"Now I'm known as a long-term investor and a patient guy, but that is not my idea of a big move."
-Warren Buffett

In this 1999 Fortune article "Mr. Buffett on the Stock Market". Granted the time and tape he was talking about was even worse:

December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00

AMAT is not a Warren Buffett stock; if it were, he'd own it, but I love the quote and use it where I can.