Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Here at The Motley Fool, we believe in long-term investing. For my personal portfolio, I strive to find companies that will do the heavy lifting for me over the long term. This task does involve a considerable amount of research prior to taking any position, but I believe it ultimately puts my portfolio in greater position for the years to come. Now that we've reached the new year, it's a great opportunity to reevaluate your investments to ensure they've remained on course. Quoting investor extraordinaire Peter Lynch , "The best stock to buy may be the one you already own." With that said, I'll be focusing on three of my favorite tech holdings for 2013.
Apple (NASDAQ: AAPL )
I own Apple for the value shares offer, its supply chain, and its ability to sell products at a ridiculous premium over competitors' wares. Analysts expect Apple to grow its earnings an average of 21% over the next five years. At current levels, Apple's trailing P/E of 12 represents a 43% discount to this expected growth rate. Based on these estimates, shares could appreciate by 75% in value, and only then would its PEG ratio reach 1. In other words, multiple expansion could be a big deal for Apple investors.
In terms of supply chain, Apple has arguably the best supply chain in technology, well ahead of the competition. It can support a distribution model where the iPhone 5 can be simultaneously sold in 101 countries, where iTunes is available in 119 countries, and where its App Store is available in 155 countries. Now consider this: Apple's international business only accounted for 60% of its total revenue last quarter. To me, it seems highly plausible for Apple to grow internationally in the years to come, leading me to believe that the market is currently pricing Apple irrationally.
3D Systems (NYSE: DDD )
If you're looking for the most diversified and far-reaching 3-D printing investment, look no further than 3D Systems. I own 3D Systems because the company is leaving no stone unturned in the budding 3-D printing industry. It's gone on an acquisition binge (16 since 2011) to bolster its 3-D printing portfolio, translating into more opportunities for it to sell its products and services. Whether you're a start-up or an aerospace company, 3D Systems wants your business.
A trailing of P/E 89 doesn't scare me, because a business that's reinvesting into its future is likely to have a high PE. This growth and reinvestment is intended to strategically position 3D Systems in the decades to come. Shares gained 270% last year, indicating that investors have begun to bid up the potential effect that additive technology will have on industries like aerospace, health care, dental, and automotive. I recognize that shares may have a lot of digesting to do in the year(s) to come, but I also believe that 3-D printing is a megatrend in the making. As long as 3D Systems keeps doing what it's supposed to, I'm holding on.
Intel (NASDAQ: INTC )
Look, 2012 was not the best year on record for Intel. Shares were down 12%, primarily driven by a weak PC market. PC shipments fell more than 8% in the third quarter because mobile computing is on the rise, an area where Intel lacks market share. With the release of new chips, Intel hopes to begin capturing market share in the tablet market, as well as the value segment of emerging-market smartphones this year.
At the Consumer Electronics Show in Las Vegas, Intel detailed what's in store for 2013, including Intel-powered smartphones, tablets, and Ultrabooks. Naturally, users can expect performance gains and more energy efficiency, but the most notable improvement is with Ultrabooks. Intel managed to drop the power consumption from 17 watts to 7 watts, which is a big deal, considering Intel has 140 Ivy-Bridge-powered Ultrabooks on the market. This should force OEMs to upgrade to Intel's latest and greatest, stoking new chips sales for Intel, and all-day battery life for users.
But the main reason why I own Intel is for its discounted value relative to its positioning in a few years. By next year, Intel is expected to be shipping Atom chips fit for the smartphone market based on 14-nanometer designs. In terms of power consumption, these chips will be very difficult for Taiwan Semiconductor (NYSE: TSM ) to compete against. That's because TSMC is only expected to see 20-nanometer chips come out of its foundries, which doesn't appear likely to match Intel's 22-nanometer system-on-a-chip process, according to ExtremeTech. When I consider Intel's road map and see shares trading at 11 times forward earnings with a 4.3% dividend yield, my inner investor-nerd gets excited.
Get rich slowly
Investing over the long term is about the big picture and how a company's strategic position fits into that story. It's about having enough patience and a strong stomach to stay strong (after you did your homework) when things head south, because they will head south. Long-term investing can be extremely boring, but it can also have profound effects on your future wealth. Never underestimate the power compounded returns could have on your future.
I've given you three names to consider for 2013. Go with Apple if you want value, but if you want extreme value, go with Intel. Go with 3D Systems if you want to buy a high-growth, albeit riskier industry disruptor. Of the three, I'm most excited about 3D Systems' long-term future.
What's inside Supernova?
Apple has been a longtime selection of Motley Fool co-founder David Gardner, helping lead his stock picks to gains of more than 113% in our Stock Advisor service since it launched in 2002. David has managed to trounce the market by always being on the lookout for revolutionary stocks and recommending them before Wall Street catches on to their disruptive potential. If you're interested in how David discovers his winners, click here to get instant access to a personal tour behind David's Supernova service.