Intel Corporation (INTC) shares have rallied indicating the weak performance of other semiconductor stocks, says a report from South China Morning Post. Shares of the chipmaker rallied around 17% since June 12, when Intel revised its second-quarter revenue forecast upwards.
Intel outperforming benchmark
Philadelphia Semiconductor index dropped 3.5% during the same period with the possibility of further down trends ahead. Traders are showing greater confidence in Intel by transferring their money to the stock and pulling out of the declining stock in the industry, according to Jim Stellakis, the founder and director of research at Technical Alpha. Stellakis said that this explains why other companies are losing among the investors already suffering the seasonal weakness.
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Philadelphia index constitutes of Intel, Micron Technology, Texas Instruments and 27 other companies, and has dropped 5.7% since June 30 compared to the Standard & Poor’s 500 Index, which is down 2.6%. On trailing 10-year basis, the semiconductor group of shares has been behind the benchmark index by an average of 1.6% points last month and around 1.5 points this month.
Intel shares have outperformed the index for at least eight months on six occasions since 1995. On all the occasions, the group was behind the S&P 500 as per the research conducted by Stellakis. “If history is any guide, semiconductor bulls should keep an eye on Intel,” he said.
Intel benefits from its large-cap status
Andrew Burkly, the head of institutional portfolio strategy at Oppenheimer said, “When Intel is doing well; it fundamentally crowds out some of its smaller competitors, spurring inflows into this technology giant.” Burkly added that Intel shares rallied because it was a liquid, as well as, large cap company for many portfolios. Burkly said that the earnings forecast of Intel were substantially revised this time in last five years. The chipmaker guided that fiscal 2014 sales will increase 5% to $55.3 billion from $52.7 billion last year.
According to Burkly, analysts have also revised their earnings estimates reflecting the sentiments were “broadly improving and has high conviction behind it.
In June, a report from Gartner said that the Global information technology spending will rise 2.1% to $3.7 trillion this year, a decline from March estimated figures of 3.2%. When compared with 2012, these expenditures remained flat.