Why Old-School Tech Stocks Are Beating Social Media

While many of the newer social media stocks struggle for gains this year, old-school tech stocks have become some of the best trades on the market.

With the rare exception (Facebook is doing well—shares are up 26% year-to-date) the social stocks are in the gutter. They got off to a fast start in January and February, but ran out of steam in the spring. Aside from a few feeble attempts, few have posted anything close to a noteworthy comeback. Twitter, LinkedIn, and Groupon are all down double-digits year-to-date. Groupon—the worst performer on this short list—is down 47%.

On the other had, the biggest of the big tech stocks on the market are helping traders pile up even larger gains right now.

“Along with Intel, ‘old Tech’ stocks that were once speculative names like Microsoft (MSFT), Hewlett-Packard (HPQ), Adobe (ADBE), Cisco (CSCO) and Applied Materials (AMAT) are having stellar years,” reports Bespoke Investment Group. “Earlier in the year, investors began flocking to these now-stable Tech companies when the ‘new Tech’ momentum-trade took a tumble.  While the speculative names have certainly found a bottom since the March-May pullback period, the old Tech stocks have continued to act well.”

While many social media and other “new tech” names are well off their highs, the stodgy veterans that survived the 2000 tech bubble crash are back in favor in a big way. These growth-turned-value names are back in growth mode—and it’s about time. While almost all of the names in this space are back above their 2007 highs, many of them are still trading well below the bubbly share prices we saw 15 years ago…

Apple Inc. Vs. Global X Social Media Index Fund

“Trade of the year” candidate Apple Inc. (NASDAQ:AAPL) has posted gains of 20% so far this year, compared to the S&P 500’s rise of about 7%. The Global X Social Media Index Fund trails them both by a wide margin. It’s down about 10% so far this year.

Last night, Apple reported its second straight quarter of double-digit growth in iPhone sales. A positive reaction to the news could help send Apple shares back into triple-digit territory for the first time since its 7-for-1 stock split.

Then there’s Apple’s old-school competitor, Microsoft Corp. (NASDAQ:MSFT). Microsoft is also up by more than 20% this year. Its latest push higher comes courtesy of layoffs announced last week. Microsoft is looking to streamline its business, including its newer Nokia division. Investors loved the move, bidding shares up 5% before the week was up.

Regards,

Greg Guenthner
for

PS: If you’re digging around the tech sector for a trade, steer clear of the social stocks and their so-called comeback attempts. These old-school tech trades offer everything you could possibly want: performance, momentum, and even a few good values. Sign up for the Rude Awakening for FREE today to see how you can trade these trends for huge gains…

The Daily Reckoning