Why Tech Remains Vulnerable

From the "either one is too cheap or one is too expensive" file: In the wake of Tuesday's trounce, here's all you really need to know about tech, as related by one of my favorite tech traders (who also runs a tech hedge fund):

Example 1: Hewlett Packard (HPQ) dropped 3.4% with a PE of 14, down around 10% from a recent high -- and its business is executing well, it's gaining share and its EPS is growing fast. By contrast Intel (INTC) was down 3.9% with a 20 PE, up 20% from last year's lows -- and its business is executing poorly, it has been losing share, its EPS has been shrinking and it's much worse off than it once was.

Example 2: Cisco (CSCO), down nearly 6%, with a 17 PE, down around 10% from its recent high -- business executing well, gaining share, growing its EPS. Xilinx (XLNX) down 1% with a 23 PE (pre options expenses), up around 38% from recent lows -- business, EPS shrinking.

Example 3: Nokia (NOK) down 6% at a 14 PE, down around 5% from recent highs after a positive change in course -- business executing well, gaining share, growing EPS, largest competitor showing signs of weakness. Texas Instruments (TXN) down 3% at a 19 PE, up around 14% from lows -- shrinking revenue and EPS, losing share at its largest customer.

Says this trader: "When folks rout the OEMs, yet defend or buy their cyclical, slower-growing, secularly deteriorating suppliers at 30% higher PEs, well, it reminds me of the Year 2000."

He adds: "Best line I heard all day: Semi's holding up because they represent the new economy, China is old economy. (Hmmm, where is all the PC and handset unit growth coming from...Haiti?)"

On that note...onward...

Comments

[Wannabe Maven:]

The news about INTC is a bit old. INTC has been executing well the last couple of quarters (as they used to) and has its chief rival pinned to a corner. While the stock may be overpriced, it is not the bumbling company it was in 2005.

2007 Feb 28 01:41 PM