Dykstra: A Sunny View on AMAT's Calls

The chipmaker has an in on the growing solar market.
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Applied Materials (AMAT) - Get Report is well known for creating the machinery that helps chipmakers manufacture smaller, smarter and less expensive microchips.

Today's micro-circuits are measured in nanometers (nm), or billionths of a meter, and around the globe, every day, equipment made by Applied is etching out transistors that are smaller across than light waves, approximately 65nm and even smaller in size. The company's plasma etching systems carve out material less than 30nm wide and can remove single-nanometer layers of material. Its equipment can deposit single atoms of copper, measuring a mere 5nm thick; it's done with high-volume, cost-effective machinery that yields reliable, low-cost products.

Applied also manufactures equipment to produce flat-panel and liquid crystal displays, with customers such as


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and Samsung contributing to AMAT's $9.87 billion in sales.

Another glimmer of light for Applied is solar power. Although solar is still a very small part of Applied Materials' nearly $10 billion annual revenue, the emerging category is growing fast, and recently Applied Materials won the "Susanne Wilson Award for Pollution Prevention/Resources Conservation: Special Project" for its energy-efficient semiconductor equipment design program.

So far this year, Applied Materials has booked $300 million in orders for solar equipment that uses its nanotechnology to create more efficient and affordable solar panels. Previously, the company had forecast solar-panel gear sales of $200 million for the fiscal year that will end in October; now it says sales could hit $400 million.

Now, on to the financial strengths of the company.

In 2006, revenue grew 31% to $10 billion, making it the second-best year in its 40-year history. The company also boasts about $2 billion of cash in the bank. The company comes in with a return on equity of 22.7%, nicely above the forward P/E of 13.9. The stock closed at $18.79 last Friday.

This company has exactly what we look for in our DITM calls strategy, and that's why I will place an order to by 10 contracts January 15s (ANQAC) at $4.20 or better.

Game of Life

Baseball had an interesting week, including the annual draft.

The Mets still enjoy a small lead over the Braves in the National League East, with the Phillies actually within hailing distance at five games back. The Brewers, who still enjoy a comfortable lead in the NL Central, are slowly playing their way back to the rest of the division, all of which are significantly below .500. In the best race in baseball, the Padres and Diamondbacks are tied for first, with the Dodgers a mere 1 ½ games back in the NL West.

The AL West finds the Angels enjoying a five-game lead over the Mariners and the Athletics. In the AL Central, the Indians have a slim 1 ½ game lead over the Tigers. The Yankees, fueled by the long awaited launch of The Rocket, are in the midst of a six-game winning streak, which has enabled them to move into second place in the AL East, 9 ½ games behind the Red Sox.

Clemens, who lifted off a bit slowly, fired a booster rocket after the first few innings, which allowed him to strike out seven batters in six innings of work. He gave up 3 earned runs and retired the last seven batters he faced.

Meanwhile, my former teammate, Curt Schilling, came within a whisker of a no-hitter on Thursday, settling for a one-hitter, after pitching 8 2/3 innings of no-hit baseball. Kudos to Trevor Hoffman, the Padres closer, who registered his 500th career save (the most ever) on Wednesday.

In New York, on Saturday, they ran the Belmont Stakes, the third leg of thoroughbred racing's Triple Crown. As evidenced by the relatively paltry crowd of 46,870 (the smallest since 1996), with no Triple Crown contender, the Belmont lost some of its luster.

Nonetheless, the relative non-event became quite eventful, by virtue of the gender of the winner. Rags to Riches became just the third filly to win the Belmont, and the first in 102 years, as she won by a head over Preakness winner, Curlin.

The San Antonio Spurs, by virtue of their victory last night, possess a 2-0 lead on the Cleveland Cavaliers in the NBA finals. Although the next three games will be played in Cleveland, it does not appear at this point that the Cavaliers have any answers for the Spurs' dominant performance.

At the conclusion of the French Open at Roland Garros, in Paris yesterday, the red clay was evident on every aspect of Rafael Nadal's tennis garb. In addition to the clay that invariably accumulates during a match, Nadal assured that his outfit would be caked with the red stuff when he triumphantly lay on his back, hands to the heavens, celebrating his victory over Roger Federer, the world's No. 1 ranked tennis player. The brilliant Nadal, No. 2 in the world, but unequivocally No. 1 on clay, claimed his third consecutive French Open title.

The Players Club recognizes that certain players excel on certain surfaces, just as certain batters seemingly "own" certain pitchers. Regardless of that dominance, there are other surfaces, as well as other pitchers that may prove more difficult to conquer.

Similarly, there are many ways to invest your money. By guaranteeing recurring cash flow, through our strategic partner, The Players Club furnishes athletes with an ability to dominate perhaps the most important surface, their respective financial futures.

Always remember: Life is a journey; enjoy the ride!

At the time of publication, Dykstra had no positions in stocks mentioned.

Nicknamed "Nails" for his tough style of play during his Major League Baseball career, Lenny Dykstra was an integral member of the powerful Mets of the mid-1980s, including the world champion 1986 squad, and the Phillies in the early 1990s.

Today, Dykstra manages his own stock portfolio and serves as president of several of his privately held companies, including car washes; a partnership with Castrol in "Team Dykstra" Quick Lube Centers; a state-of-the-art ConocoPhillips fueling facility; a real estate development company; and a new venture to develop several "I Sold It on eBay" stores throughout high-demographic areas of Southern California.