When I was reading the Seeking Alpha transcript of INTC’s 1Q15 earnings the other day, I notice that an ad popped up to the right of the text. It was mostly a list of passive tech-oriented ETFs, with a performance comparison against INTC. The list showed that INTC had handily outperformed any of the other entries over the pat twelve months …but that the year-to-date results were a markedly different story.
That started me thinking. Would I be better off with an ETF than with INTC?
On the one hand, INTC is a relatively cheap, high dividend yield stock, whose glory days of the PC era are far behind it. the company finally recognizes this and is in the midst of an attempt to morph into a 21st century-relevant firm. If it’s successful, I can imagine the stock could have, say, a 35% gain in price as Wall Street discounts better future earnings propects (I’d say much the same of the post-Ballmer MSFT).
This isn’t a bad story. I’m arguably paid to wait. The stock’s valuation is reasonable. And at the moment I don’t believe the overall US stock market has very much near-term upside. So I’ve been content to hold.
The ETF ad, though, got me thinking. Can I do better, without taking a significantly larger amount of risk?
This question has two parts:
–is there a better tech stock than INTC?, and
–can I locate it?
I’m convinced that the answer to the first is Yes and that the area to look is online services for Millennials and the companies that supply support and infrastructure for them.
For me, the issue is whether to search for, and concentrate, on a single stock–something that requires a lot of time and effort. I think it’s better to look for an ETF or mutual fund. The best I’ve found so far is the Web X.O ETF from Ark Investment Management. The ETF is tiny, so liquidity is a risk–in fact, Merrill Edge wouldn’t accept an online order from me for this reason. I had no problem with either Fidelity or Vanguard, however. The other thing is that ARK is a startup. The principals may have had long Wall Street careers but I see very little evidence of hands-on portfolio management experience. So ARK is in a sense establishing its bona fides with (a small amount of) my money. Not exactly the same risk profile as INTC.
Personally, I’m not so concerned about the portfolio manager. The organization publishes its holdings every day. For me, liquidity is the bigger worry–and something that would make me reluctant to recommend ARK to anyone else. Still, I own some. And I’m looking for other vehicles that can potentially serve the same purpose in my portfolio.