Gyroscopic Investing

A long term trend that is going to play out over the next decade is the shift in the consumer computing space from Intel to ARM processors.  Imagine Intel, a $43.6 billion company, being upstaged by a $631 million company, ARM.

You can see it happening all around you with smartphones, tablets, TVs, and even Windows 8 will run on ARM CPUs.  Intel will still reign the server space (although low power, low heat chips might eat some of their lunch in the cloud space), but their days are numbered as most consumers don't need an eight core monster CPU in their computing devices any more.

Here is a great article in The Economist talking about this competition:

http://www.economist.com/node/21542402

Storm wrote:...as most consumers don't need an eight core monster CPU in their computing devices any more...

I do, I do!!!! 

Interesting article Storm! So is ARM in your VP?

jmourik wrote:

Storm wrote:...as most consumers don't need an eight core monster CPU in their computing devices any more...

I do, I do!!!! 

Interesting article Storm! So is ARM in your VP?

ARMH is in my VP and has been for a couple years now.  It has more than doubled already, but I'm hoping for more exponential growth... too bad I only put a few thousand in it... :-/

ARMH has a P/E of 75 with 19% revenue growth and 112% earnings growth.

INTC has a P/E of 10 with 28% revenue growth and 17% earnings growth.

A P/E of 75 in this market makes me nervous, even with great numbers.

OTOH, a P/E of 10 in this market with double digit revenue and earnings growth makes me feel better.

ARMH stock has clearly had a beautiful run, though.

Somebody had previously posted about betting on ARMH, although it was probably in the bogleheads forum. Can't remember.
Edit: It was you, Storm. I thought this sounded familiar. ;-) http://gyroscopicinvesting.com/forum/ht ... ic.php?t=3
It's not because of the Economist, but I sold all my Intel shares earlier this week.

Stock Pickers and  Trend Watchers? Meh, I'd rather let the pp do its thing while I listen to "Beer Drinkers and Hell Raisers".

MediumTex wrote: ARMH has a P/E of 75 with 19% revenue growth and 112% earnings growth.

INTC has a P/E of 10 with 28% revenue growth and 17% earnings growth.

A P/E of 75 in this market makes me nervous, even with great numbers.

OTOH, a P/E of 10 in this market with double digit revenue and earnings growth makes me feel better.

ARMH stock has clearly had a beautiful run, though.

It's not just about P/E though... It's about long term growth prospects.  HP has a P/E of 7.95 right now, but I don't see many people wanting to buy a lot of HP stock.  RIMM has a P/E of only 3.61!  A bargain!  But, would anyone seriously buy RIMM thinking they're going to turn things around and out-compete iPhone and Android?

In this case the P/E just reflects the fact that the smart money has already bought into ARMH, and the market is beginning to price in their inevitable victory.

I could be wrong though -perhaps Intel will learn how to make chips that can work in smartphones and tablets at a low power level.

dualstow wrote: It's not because of the Economist, but I sold all my Intel shares earlier this week.

aaaaaand now regretting it. 

Wow, it looks like Storm has done really well with ARM Holdings (ARMH) if he held on. I couldn't get the custom chart to work today in yahoo, but looking at the 5YR chart for ARMH vs INTC, it's a smackdown.

dualstow wrote: Wow, it looks like Storm has done really well with ARM Holdings (ARMH) if he held on. I couldn't get the custom chart to work today in yahoo, but looking at the 5YR chart for ARMH vs INTC, it's a smackdown.

I think he did a lot better in Bitcoins.

MachineGhost wrote:

dualstow wrote: Wow, it looks like Storm has done really well with ARM Holdings (ARMH) if he held on. I couldn't get the custom chart to work today in yahoo, but looking at the 5YR chart for ARMH vs INTC, it's a smackdown.

I think he did a lot better in Bitcoins.

Speaking of Bitcoins, I highly recommend the book Digital Gold by Nathaniel Popper.  I heard the author interviewed by Russ Roberts on a podcast (EconTalk) today. 

Roberts also recently interviewed Benn Steil, who wrote The Battle of Bretton Woods about John Maynard Keynes and Harry Dexter White and how the dollar came to be so dominant in the world.  I just finished it - I think a number of forum participants would like it.  You couldn't make up stuff like this.

Doesn't intel have the cash to buy ARM outright?  What am I missing?

If they did, they may not anymore.  They just bought Altera for $16.7 billion.  That is them trying to ensure they keep the server market, though.  It isn't a foray into embedded.

I was thinking about buying Altera stock several months ago, but I talked myself out of it.