Intel: Sell The Ticks, Buy The Tocks

May.14.13 | About: Intel Corporation (INTC)

Since 2007 Intel (NASDAQ:INTC) has followed the tick tock model. Every year Intel releases a new line of CPUs with either a tick (die shrink) or a tock (microarchitechture change).

Gigaom wrote an article that compares the geekbench performance of Macbook Pros since this tick tock began.

(click to enlarge)Click to enlarge

My investment thesis is that the tocks tend to have a bigger performance boost than the ticks, and should correlate to better performance of Intel itself. Let's look at what would happen if we sold the ticks and bought the tocks starting with the first tock on July 27, 2006 with Conroe.

Intel Sell the Ticks, Buy the Tocks Performance

tock date tick date tock price tick price total return cagr
7/27/2006 11/11/2007 17.47 25.29 44.76% 33.12%
11/17/2008 1/4/2010 13 20.88 60.62% 52.01%
1/9/2011 4/29/2012 20.69 28.395 37.24% 27.47%
Click to enlarge

Let's compare this to the performance of the S&P500 over the same time periods.

S&P 500 Performance over the Same Periods

tock date tick date tock price tick price total return cagr
7/27/2006 11/11/2007 1263.2 1439.18 13.93% 10.61%
11/17/2008 1/4/2010 850.75 1132.99 33.18% 28.81%
1/9/2011 4/29/2012 1269.75 1397.91 10.09% 7.65%
Click to enlarge

With only three data points this is just the start of a trend. It looks like Haswell (Intel's next tock) is going to be a significant performance boost. In addition, Seeking Alpha's resident Intel bull makes a strong case that Intel will outperform estimates. Intel releases Haswell on June 2nd 2013. I am long Intel common stock as well as $22, $25, and $35 2015 calls.

Disclosure: I am long INTC, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.