"The decline in the price of Intel (NASDAQ: INTC) is disconcerting, but on balance, not a surprise," says tech guru Paul McWilliams.
Here, in his Next Inning newsletter, the advisor reassesses his forecast for Intel and the tech sector made at the start of the year, and his continued optimism for the stock’s future performance.
"In January, I initially concluded that mature global economies were likely going to exhibit slow growth in 2008 and may dip through a recession. “However, I also had forecast that emerging economies were large enough to where their contributions, even though they would also probably see some slowing in 2008, would keep aggregate growth high enough to avoid any serious worldwide macroeconomic pain.
"My conclusion was that while it is normal to expect spending by governments, businesses, and consumers to follow GDP patterns, there are what I saw then and still see now as good reasons to believe there would be a preference given for tech.
“In other words, my belief was then and still is today that spending on certain tech sectors would hold stronger than normal in the face of aggregate GDP slowing.
"At the top of my list for spending was my contention that consumers in emerging markets would increase their appetite for PC's this year.
“My thinking was that the first wave of consumers had already bought their cell phones, TV's, and DVD players, the first three priorities for consumers in these markets.
"I further expect that due to the declining PC prices and the much more common availability of broadband, consumers would trade the inconvenience of Internet cafes for a home PC.
"The data through the first half suggests this is pretty much what has been happening. As INTC bottomed in January I wrote that I was shifting even broad index money into the stock.
“While I certainly give room for INTC to come in softer than what the company has led us to expect in the second half, I think the valuation and longer-term story is compelling enough that it's time to start reloading the guns."
