Tech Sector Stalwarts: Is There An Investor Opportunity Here?

Teck Stocks
Teck Stocks

This has been a crazy week on the markets, and it's still only Tuesday morning out here in Silicon Valley. But look no further than the stalwarts in the PC business, like Apple, Hewlett-Packard and Dell to see a new kind of volatility index.

And with volatility comes opportunity.

Apple shares today were getting crushed, touching $132.15 before bouncing back. What's funny, or tragic depending on your position in the stock, is the reason why: Dell comes out with some nasty, global IT spending slowdown, and indicates that even though it still plans to grow faster than the overall sector, the overall sector is softening. From its perspective. You just gotta wonder if the problems Dell is seeing are its own, and whether strength at Apple and HP are causing Dell's problems.

After all, it was just yesterday, that Citigroup's Richard Gardner sent out a bulletin to his firm's clients that Apple's September quarter is tracking very nicely, "thanks to surprisingly robust iPod shipments and in-line PC shipments." That's significant since Gardner is anticipating $8.3 billion in Apple revenue, or about $200 million ahead of consensus. More telling, he's tracking new MacBooks that have left Apple's Chinese factories and are headed West.

It's true that Goldman (no relation) removed Apple from its "conviction list" this morning, but that might have been premature. Just on valuation alone, and again, as I harp on fundamentals (again!), Apple is about 18 percent above its 52-week low, and at $139 and change, way, way, way below its 52-week high, this stock becomes attractive again. It's forward P/E of 23 seems cheap, especially considering what Steve Jobs told me just last week when I asked him about how the company was performing in this economy:

"Apple's very lucky, we're doing better than most companies out there. This is a tough environmental situation to be in right now. Tough economy, and I'm not an economist, so I don't know if it's gonna get better or worse, but I think Apple is faring reasonably well right now," Jobs told me.

Now play those comments against the dire news out of Dell this morningwhich drove shares down to their lowest level in a decade. The company cited weakened IT spending in the US when it released earnings a few weeks ago, but now says that weakness has spread to Europe and "several countries in Asia." The news spewed kerosene on an already white hot Wall Street, flaming with investor concerns about a wholesale sell-off in all equities, no matter the sector. Fundamentals be damned in this sell-first-ask-questions-later climate.


Dell's been suffering enormous problems. Its turnaround has failed to garner any traction. Its chief rival HP continues to gobble up market share, and its move for EDS makes it a far more major player in the services sector. Dell can't compete. The markets it operates in have passed it by. Dell is a mess.

But that doesn't mean Apple should be taken down with it. Or HP, or even Intel, or Cisco or Research in Motion. The fundamentals of these other companies are solid.

Look, it's so easy to buy high and sell low. Discipline comes from knowing when to buy low and sell high. Stocks are low now. They'll likely go a little lower.

But rather than focusing on broad brush strokes and selling everything, take a look at some of the bigger, more solid names, the leaders in their respective markets. Their fundamentals. Do that, and a choppy, volatile, ugly market like this may offer up the best opportunities yet for the choosey, savvy, knowledgeable investor.

Caveat Emptor, yes. But Carpe Diem, too.

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Questions? Comments?