Intel and Avnet: Neither Scream the Boom Times of Yore

The mass of men love to look at Intel as a bellwether for the broader tech economy.  Certainly, as Intel and Microsoft have created the platform on which 97% of the world’s computers run on and the company has grown from nothing to doing nearly $40 billion at about 60% gross margins, it’s clear that as goes Intel, so goes the computing world.But the computing world’s importance in tech has waned as the Internet age and the iPod/Crackberry age have gained importance.  It might be better in this day and age to look at other suppliers into the tech world, that have a broader customer base…

And one good one in that regard is little ol’ Avnet.  This company, which ain’t so little given that it does almost $16 billion in sales a year, distributes electronic components and all the little things that go into all the little (and big) electronic gadgets around the world.  (Btw, the company sells that $16 billion of stuff at only about 15% gross margins — proprietary technologies like Intel’s are key to margins and since there’s nothing proprietary in commodities, that’s why commodities are never a good long term investment…yes, including oil, wheat, contract manufacturing, bookkeeping, etc.)

Avnet’s report was ugly as the company missed the top and bottom line and says the distribution business is finding rather soft demand across most the world.

Not that anybody should be shocked that demand is soft in this economy right now, and again, these stocks and these markets have already been crushed.  Avnet’s down big today, so you can’t say it’s ALL priced in…but certainly Avnet could have been down a lot bigger today than just the 10% it is down.

Stay bullish, but this certainly still isn’t the time to be thinking about being levered up or aggressively long as it sometimes was when stocks would get crushed during the last handful of years even as the fundamentals were steadily improving.

Avnet’s ugly fundies are certainly not “steadily improving” right now.  And guessing what’s priced in is certainly not for the faint of heart.  There’s a time and place for everything.  This ain’t the time and place to be betting the farm, even if you are, like me, expecting higher highs over the next few weeks and perhaps months.

PS. I'll be giving some real-time earnings and trading analysis on Intel and Seagate on Happy Hour tonight, and Gogo and I will be joined by Minyanville.com's Kevin Depew to preview the rest of the week's earnings too.