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Large Cap Tech (The Future Co.)


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While I don't own any large cap tech (it makes no sense given my portfolio size), I was wondering where the board stands with regards to this sector? While it is true that it is difficult to pick winners and losers given the industry fundamentals, it seems that one could create an interesting cheap basket of stocks in this environment.

 

A thought experiment:  MSFT, INTC, GOOG, DELL, CSCO, AMD and AAPL merge to form The Future Co (TFC.)  One could essentially own TFC for a P/E of 14.  It would have a market cap of $955.7B, earnings of $67.5B, cash of $175.7B and LTD of $34.9B.

 

Doesn't seem like that bad of a valuation to essentially own the future.  

 

Of course, being tech, there is always the risk of obsolesce, new unseen competitors, regulation, low global growth, etc.

 

But I thought it was an interesting way to look at how the market is viewing our technological future in a very general way.  

 

Your thoughts?

 

P.S. - You could buy a monopoly on desktop and laptop computer processors by buying INTC and AMD.  Processor Co would have a market cap of $116B, earnings of $11.9B, cash of $23.5B and LTD of $4.5B.  P/E = 9.7.

 

 

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  • 2 weeks later...

I'm going to bump this topic.

 

I would go with INTC and drop AMD, mainly because of size. AMD just has a serious disadvantage when you compare budgets for R&D, marketing, ... What advantage does AMD have over INTC to steal its market share in the future? After a very quick view AMD seems to be more expensive too based on a simple P/E. INTC is at 10x P/E which includes a lot of cash and they can still have some growth. is ARMH a serious threat for them to get market share in the mobile devices sector? Probably, but at current valuations their normal bussiness seems more than enough?

 

MSFT has some size moat (economies of scale) because of user habits. I doubt CSCO, AMD and DELL have the same connection with their consumers? But I do like DELL because M. Dell returned, lots of cash overseas (change for tax problems coming?), low valuations not considering possible growth under Michael Dell, ...

 

Btw we have WDC, HPQ, ... to consider too!

 

Just some very quick points that I wrote down without any thorough research!

Any thoughts?

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While I don't own any large cap tech (it makes no sense given my portfolio size)

 

This doesn't make any sense to me. Why would the size of your portfolio have any impact on the type of companies you own?

 

And outside of Google, you listed a bunch of companies with a pretty weak future outlook. Base your investment decisions base on the future of companies, not just their pasts.

 

ARMH IS replacing Intel and AMD. The issue with them is their profit on their chips are nowhere near Intel's. The momentum clowns don't seem to care though.

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  • 3 weeks later...

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