It’s time for a broad review of my core holdings, starting with the technology sector.
I only buy stocks that pay a dividend, so Google (GOOG), Amazon (AMZN) and Yahoo (YHOO) are out. However, based on other fundamentals such as PEG Ratio and Gordon Return. Google looks pretty good here.
Looking at the stocks I own – Apple (AAPL) and Intel (INTC) – we see two very different pictures. Apple has a decent indicated Internal Rate of Return (IRR) of 8%, a smallish dividend, but a good PEG Ratio and strong earnings growth. I still like Apple, especially after recent price decline (down from the $700s to $620s). Intel is a disaster. Growth is down to 1.4% driving the PEG Ratio to over 7. IRR is almost 10%, due primarily to the depressed price, and the dividend is the highest in the sector. I think that I have already suffered through the worst of Intel’s price declines and, based on my key measure of IRR, it is worth owning here. I’m sticking with Intel on the fundamentals.
Of the other stocks that do pay a dividend, MicroSoft (MSFT) and Cisco (CSCO) have the strongest indicated IRR, each over 10%. They both have decent PEG Ratios, PE Ratios and dividend yields. Microsoft has a markedly higher earnings growth rate. I have tried to buy MicroSoft before, and thought it was a little expensive. Perhaps I should try again?