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Apple who? Microsoft, Intel rule Dow

September 11, 2014: 12:20 PM ET
Who says PCs are dead? Intel and Microsoft are the best performing stocks in the Dow this year.

Who says PCs are dinosaurs? Intel and Microsoft are the top stocks in the Dow this year.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

PCs aren't dead yet. Sure, you're probably reading this on a phone or tablet. Maybe you'll one day see stories right in front of your eyes on your Google Glass or Oculus Rift.

But big businesses still mostly use computers in their offices. And that's a main reason why Windows maker Microsoft and semiconductor giant Intel, the two companies so tied at the hip that they have the Brangelina-esque mashup nickname of Wintel, are among the hottest stocks on Wall Street this year.

Shares of Intel (INTC) are up 33% so far in 2014. That makes it the best performer in the Dow Jones Industrial Average. Microsoft's (MSFT) stock is up 24%. It's the second biggest gainer in the Dow and on par with Apple's (AAPL) gains this year.

Related: Microsoft and Intel are big winners in CNNMoney's Tech 30 too

Investors seem to realize that Intel and Microsoft both stand to benefit from new demand for corporate PCs and servers now that Microsoft is finally pulling the plug on two popular products that many businesses rely on.

Windows XP has already been phased out and Microsoft recently announced that it will end support for Windows Server 2003 next July. The end of XP could lead to more adoption of Windows 8 in the workplace. And Microsoft is now touting Windows Server 2012 and its cloud-based Azure platform.

Increased software sales from Microsoft help Intel because it leads to stronger demand for the chips it makes that run PCs and servers. In fact, shares of former Dow component Hewlett-Packard (HPQ) are up more than 30% this year in part due to hopes for a rebound in hardware sales.

Still, it's not as if Microsoft and Intel are sticking solely to PCs. Both companies realize that they must adapt to the changing tech world.

Two of Intel's most rapidly growing divisions are units making chips for data centers and the so-called Internet of Things (i.e. connected devices in your home.)

And Microsoft, under new CEO Satya Nadella, has been emphasizing the cloud as well as other growth areas, such as gaming. There are reports that Microsoft may soon acquire the maker of the popular Minecraft game for $2.5 billion. If that happens, it's a big addition to Microsoft's Xbox franchise.

Related: Gates is gone. Microsoft is officially Satya Nadella's company

Wall Street clearly likes this strategy. It's telling that Intel and Microsoft are both performing well even as more rapidly growing companies like Apple and Facebook (FB) -- which are arguably the two most important tech companies helping to shape consumer tech trends -- are thriving too.

Investors have often made the mistake of giving up on "older" companies out of fear that they will soon be obsolete. But there's nothing wrong with being old or mature as long as you have an innovative management team that's constantly looking for ways to avoid being stuck in the past.

Microsoft appears to have that with Nadella and so does Intel with new CEO Brian Krzanich.

It doesn't hurt either that both companies trade at relatively reasonable valuations and that each pays a dividend that yields 2.6% -- higher than the rate on a 10 Year U.S. Treasury bond. So Intel and Microsoft offer the best mix of growth and safety at a time when investors are craving both.

Reader Comment of the Week! The biggest shock from Apple's product launches on Tuesday was probably that its wearable is going to be called the Apple Watch instead of the iWatch. But the lack of drama didn't seem to be a problem for investors. Apple's stock is up for the week so far.

The appearance by U2 was also expected -- although dropping a new album for free to all iTunes users was a pleasant surprise. Before the Apple event began, I asked followers what song U2 should play.

The winner is one of my colleagues from across the pond. He suggested that the boys from Dublin add a little twist to a song they covered on "Rattle and Hum."

Nice one, Mark! I still love the Hendrix version of Dylan's classic the best. I also have to admit that the song was an appropriate choice since there was "too much confusion" at the beginning of Apple's live stream webcast of the proceedings. Still can't get over the overly loud Chinese translation feed and Lost-like jumps back and forth in time!

  • China tech companies on spending spree

    China's tech companies are in the middle of an ambitious spending spree that will push the industry into new businesses and potentially remake large swaths of the country's economy.

    While the flurry of acquisitions and investments can't match the sticker shock of Facebook's (FB) recent $19 billion acquisition of WhatsApp and $2 billion purchase of virtual reality gaming firm Oculus, they suggest incredible ambition, especially in the cases of Alibaba and Tencent.

    Alibaba, led MORE

    - Mar 31, 2014 9:59 PM ET
    Posted in: ,
  • Sexy is overrated. Dividends rule!

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    Is it time for investors to do their best impersonation of the Virginia Cavaliers basketball team and play some stifling defense?

    Momentum stocks have had a miserable March. Just look at how poorly the Nasdaq and MORE

    - Mar 25, 2014 12:41 PM ET
  • Tech is not dead

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    In a twist on the famous quote by Antony in Shakespeare's Julius Caesar, I come to praise tech, not to bury it.

    There's been a lot of talk lately about how big tech companies are doing MORE

    - Aug 22, 2013 1:36 PM ET
    Posted in: , , , , , ,
  • Facebook to join Nasdaq-100

    Facebook is joining a new social network -- the Nasdaq-100 to be precise.

    The California-based social media company will join the elite index on Dec. 12, replacing Infosys, an Indian tech company that is moving its U.S. listing to the New York Stock Exchange.

    The move is not exactly a surprise. The Nasdaq-100 includes the 100 largest non-financial securities trading in the market. And with a market capitalization of around $60 billion, Facebook MORE

    - Dec 4, 2012 11:41 PM ET
  • Investors still shunning HP

    Investors continued to punish Hewlett-Packard (HPQ) Thursday, a day after the company issued a grim outlook for 2013.

    Hewlett-Packard extended the previous day's decline, after getting hammered on Wednesday. The stock has had a rough year, sinking more than 40% so far. That makes HP the worst Dow (INDU) performer by far this year.

    In fact, it's been a tough couple of years for HP as the company struggles to stay MORE

    - Oct 4, 2012 12:47 PM ET
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