One of my thesis for 2015 is it will be the year of PC. This might be a bit surprising, but yes, PC! A new PC upgrade cycle could begin in 2015 and last well into 2016.
After Apple introduced the iPad, there were many predictions on how the tablet will replace the PC. Although the PC sales have been stagnant in the last few years, but that was not due to tablet taking market shares away from the PC market, it was primary due to some blunders made by Microsoft and partially due to the US recession.
Microsoft got blindsided by the success of the iPad and got scared into believing the hype that the tablet and the touch screen will be the computing platform of the future. Feeling its desktop dominance being threatened, it hastily developed a new version of its Windows operating system, Windows 8. This version of Windows is to support the Windows based smartphone and to support its tablet device, the Surface that was to compete with Apple’s ipad.
Unfortunately, Microsoft made a strategic mistake while trying to maintain its mobile presence. It has decided to replace the popular Windows 7 with the touch based mobile-centric OS, Windows 8. It has pushed the OEM PC manufacturers to install Windows 8 on all new PC laptop and desktop system being manufactured. And Microsoft failed to see the flaws in trying to consolidate the mobile and desktop to an OS that was designed primary for touch and mobile. Microsoft thought its new tile interface in will entice existing Windows users to upgrade to Windows 8, and will also generate interest for PC owners to upgrade their system. But instead, the removal of the Windows 7 desktop user interface and the nuisance of the tile and touch screen interface have hampered the upgrade cycle. Not only existing Windows users did not upgrade to Windows 8, many PC owners especially corporate users decided not to upgrade their system due to Windows 8.
Now that Microsoft have realized its blunders, a new version of Windows is being develop that will undo the mistakes that were made in Windows 8 and it is anticipated this new version will be available sometime in 2015. And if this new version of Windows brings back the familiar Window 7 desktop interface, along with other enhancements to take advantage of the newer generation of processors from Intel, then the upgrade cycle will begin and PC sales will rise once again.
How would one capitalize on this imminent upgrade cycle? One can focus on the stock of the companies that help build the heart of the PC. The companies that will likely benefit directly from the PC upgrade cycle are: Microsoft (MSFT) to furnish the Windows OS, Intel (INTC) the supplier of the CPU, Micron (MU) one of the leading supplier of DRAM and non-volatile memory chips, Western Digital (WDC) and Seagate Technology (STX) suppliers of disk drive. And some peripheral beneficiaries from the upgrade cycle are: NVidia (NVDA) for high performance graphics chipset, SanDisk (SNDK) for SSD (solid state drive) and Advanced Micro Devices (AMD) supplier of lower cost CPU for the lower price PC market.
One of the ways to trade these stocks is to take advantage of any market pullback to build a position and trade them as position trades based on the upgrade cycle thesis.
And if you believe the NASDAQ will go back to test the 2000 high up at the 5000 level, then these stocks will likely participate in helping the NASDAQ to reach that historic level. Good luck and have a profitable 2015!
