Why Intel Led the Dow Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

A stronger-than-expected jobs report has pushed most stocks higher today, leading the Dow Jones Industrial Average (DJINDICES: ^DJI  )  up 1.08%. The U.S. Department of Labor said the economy added 203,000 jobs in November and unemployment fell from 7.3% to 7%. September and October employment was also revised a total of 8,000 jobs higher.  

The labor market is improving even more rapidly than economists expected, and heading into 2014 that's a good sign for the overall economy. Don't be surprised to see short-term dips as the Federal Reserve talks about slowing its bond-buying program, but these reports demonstrating economic recovery are what investors should be focused on.

Intel leads the Dow
Intel (NASDAQ: INTC  ) is the Dow's top performer today, gaining 2.4%. Citigroup upgraded the stock this morning, predicting that personal computer demand would stabilize in 2014.

Research firm IDC recently released a report that projected PC demand will fall 10.1% in 2013, 3.8% in 2014, and slowly rise after that. Analysts there think 300 million units shipped per year will be the long-term trend.  

PC demand may stabilize, but long term I don't think that's what will drive Intel's results. Intel is working hard to gain traction in convertibles, tablets, and smartphones, which are all going to grow faster than desktops or laptop PCs. If it succeeds, the stock is very undervalued.

Is Intel sandbagging 2014?
One of the assessments analysts made today was that Intel has issued conservative guidance for next year. On that front, they may be right. Intel said revenue would be flat in 2014, but if PC demand stabilizes and mobile demand picks up it could outperform that prediction.

Investors will likely have to wait until the second half of the year to see if Intel's mobile strategy is working. Its most impressive chips won't be out until then and growth will likely be geared toward the second half.

Upgrades are nice, but they're more of a reminder to check your investment thesis than a reason to buy a stock. I like Intel, but not because PCs are going to be a growth business. Mobile is where Intel's future lies.

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  • Report this Comment On December 06, 2013, at 7:24 PM, techy46 wrote:

    Intel's Atom 22nm 3D Bay Trail-T in Asus T100 for $379 makes the iPad look feeble and over priced. Microsoft's Monday Dec 9th 1st Day of Christmas Dell Venue 8" for $99 (reg $299) speaks loads for how low tablets and smart phones can really go. Intel's 22nm server chips followed by 14, 10 and 7 nm are going to be killers. Windows 8.1 works great with touch screen and keyboard. Intel's Android tablets are next up. Let the mobile PC wars begin.

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