Intel vs. India
On April 2, 1997, your editor nervously took the podium of the Grant’s Spring Investment Conference in New York City to present an argument for buying Indian stocks. In a 40-minute speech entitled, “Intel vs. India – The Quest for Value,” your editor argued that Indian stocks were woefully underappreciated…at least in relation to tech stock “darlings” like Intel.
The audience of professional investors in attendance seemed more amused by the idea than genuinely interested. After all, during the preceding three years, Intel’s stock (NASDAQ: INTC) had quadrupled, while the India Fund (NYSE:IFN) had slumped more than 40%. Surely the near-term future would resemble the recent past. Intel was a wunderkind; India was a basket case. End of discussion.
Despite the palpable skepticism in the conference hall, your editor soldiered on. After issuing a few tongue-in-cheek comparisons between Intel and India – “One makes D-RAMs; the other makes ashrams.” – your editor proceeded to offer a series of more substantive comparisons and contrasts.
For starters, he remarked, “One is expensive and widely adored; the other is inexpensive and routinely ignored.” He then identified key aspects of the bullish case for Indian stocks and predicted, “The long-tem investor will fare much better by selling the popular tech stock and buying out-of-favor Indian stocks.”
Over the ensuing four years, however, the beloved Intel easily outdistanced India Fund. India Fund’s slow and steady gains were no match for the tech-stock mania of the late 1990s. By January of 2000, every investor on earth, it seemed, wanted to own Intel, Cisco and theStreet.com. During that tech-stock mania, very few investors bothered to consider stocks listed on the New York Stock Exchange, much less the Bombay Stock Exchange.
That’s too bad.
During the thirteen years since your editor dared to admire Indian stocks in public, the India Fund has delivered a dazzling return of nearly 800%, compared to a gain of only 44% for Intel. In other words, the India Fund has delivered a whopping 18% annualized return over the last thirteen-years-and counting, compared to Intel’s paltry 3% annualized return.
The comparative results are even more lopsided when measured from the end of the tech stock bubble ten years ago. Since then, the India Fund has nearly quadrupled, while Intel has tumbled more than 60%.
Today, Indian stocks are no longer “inexpensive and routinely ignored.” At 18 times earnings, the India Fund’s portfolio is not the “deep value” it was in 1997, when it was selling for less than seven times earnings. Nevertheless, India remains an extremely compelling destination for investment capital.