The technology industry is a very dynamic industry per se, and to add to that, as Robert Kiyosaki puts it, the tech sector has currently been the “flavor of the month” for quite some time. Now that leads to a major problem. Average people tend to invest money in an industry that is in the press. And the dynamism of the industry takes the stability factor out of it. So you are left with a game where short term returns are dependent upon market emotion, creating a higher chance of failure.
Looking at it, most of the tech investors are playing the “bigger fool” theory, where they are buying stocks with rising prices. And that inspires other investors to put their money on the company in hopes of the stock price rising again. The problem with this kind of thinking is that it is based purely on market sentiment. And market sentiment is transitory.
As a clear case of confusion between this fundamental and technical investing, let us look at an example of two tech giants, Intel Corporation (NASDAQ:INTC) and Apple Inc. (NASDAQ:AAPL). What has primarily gained my attention is the graph below.
Essentially, Apple Inc. (NASDAQ:AAPL)’s stock price has returned 262.01% in the last five years, compared to a shameful 3.85% for Intel. Needless to say, while I am not saying that Apple is of no value, it is also an example of how people can sometimes keep investing based on market emotions. On the other hand, Intel might make a strong case of fundamental investing for clever investors here. In other words, while you might be more inclined to invest in Apple Inc. (NASDAQ:AAPL) (as you are governed by market emotions), there is a strong chance that you are missing a value stock, that is, Intel.
Reasons for Choosing Intel over Apple Inc. (NASDAQ:AAPL)
More focus on Android powered -smartphones – In January 2013, Intel entered into Africa when Kenyan wireless operator and Intel partner Safaricom revealed the continent’s first Intel smartphone, the Android-powered Yolo. It already has plans to enter into other countries such as China, India, Latin America and Southeast Asia.
“Today, after a year of preparation, Intel announced the Bay Trail-T microprocessor and the Bay Trail-T tablets that manufacturers are developing for both Windows 8 and Android. The Bay Trail-T is a shrink to 22 nm and enhancement of the Atom Medfield chip currently in production that will deliver as much as twice the performance with extended battery life. The Bay Trail-T is a compatible Wintel microprocessor which will run Windows 8 and any Windows app as well and Android and Android apps. This is an advantage over the ARM powered Microsoft Surface that runs a Microsoft variant called Windows RT that only runs Windows applications that have been re-coded and recompiled.
In February at the Mobile World Congress in Barcelona, Intel is expected to update its investors and partners on its Merrifield processor due to be launched later in 2013. Merrifield, first announced in May 2012 at Intel’s investor conference, is targeted at smartphones, a shrink to 22 nm with performance improvements similar to the Bay Trail-T. Intel has begun production of its LTE/4G baseband chip, according to Intel’s spokesman Jon Carville.”
Is Intel’s focus on Android-powered phones viable enough? Of course, it is. Google Inc (NASDAQ:GOOG)’s Android surged to a whopping 75% share of the global smartphone market in the Q3FY12, according to this article. That’s over four times the 14.9% market share held by Apple Inc. (NASDAQ:AAPL)’s iOS.
If the new Intel Corporation (NASDAQ:INTC)-branded chip does well in the 2013 market, we will probably see further growth in the bottom line of the company, which will likely reflect in its share price. On the other hand, unless Apple gains sufficient market share with its latest iPhones and iPads in a year or two, its stock price can be hit hard and will probably tank.
When you are investing in Intel Corporation (NASDAQ:INTC), you are not only investing in its strong technical prowess in the semiconductor industry, but also in Android’s future potential in the global market, which seems far more attractive when compared with iOS.