Re: Intel or Cisco?
Let's assume your assumptions below are right, although I think Cisco and networking have brighter prospects:
<<Cisco might have grown 80%, as you said for the last 5 years, per annum. But estimates for the next 3 is more like 34% (IBES), it's P/E is 42. Intel's growth estimate is 19, its P/E is now 22. Simple valuation based on these numbers shows Intel is perhaps less rich between the two. I would only add to my Cisco position if they continue their acquisition binge using its rich stock as cash.>>
In your scenario, Cisco's P/E will drop about 25% and Intel's will drop 15%. So, after 3 years:
Cisco = 0.75 * $10,000 * 1.34^3 = $18,045
Intel = 0.85 * $10,000 * 1.19^3 = $14,324
Even if Intel maintains a P/E of 22, you still come out ahead with Cisco. After 15 years, the difference is dramatic:
Cisco = 0.75 * $10,000 * 1.34^15 = $604,830
Intel = 0.85 * $10,000 * 1.19^15 = $115,511
It'll take you 15 years to retire with your entire portfolio entrusted to Cisco and 25 years with Intel!
It boils down to this question: Do you think the highest growth in the next 15 years will be in the Internet or the PC? |
