I just saw the news about Dell beginning to use AMD processors. It reminded me of the post I made back in October 2005 about an AMD/Intel pairs trade. Someone asked me about (gasp!) shorting AMD and going long INTC. I said I’d reverse that. Some Intel bulls chimed in talking about how Intel was historically cheap, etc. Case in point:
in the 15 yrs that I’ve been following Intel, any time it trades at a sub-20 PE, you can make money off the stock over a 6 to 12 month time frame. Intel now trades less than 19 times earnings.
The stock now sits at the bottom of an UP CHANNEL that started 9/28/04. Not only that, but Intel, $24.65, is now lower than its pre-9/11 level ($25.60), and is roughly the same price it was in August of ’97.
As they say, cheap has gotten even cheaper. Since the day I made that post Intel is down 18% while AMD is up 22%. And that’s not even including tonight’s after hours moves — AMD +14%, INTC -5%. Simply using the 200-day moving average as a stop loss would have saved Intel bulls a lot of money.
“It is one of the great paradoxes of the stock market that what seems too high usually goes higher and what seems too low usually goes lower.” ~ William O’Neil (borrowed from Ugly)
