Buy Intel Corporation (INTC) and Short ARM Holdings plc (ADR) (ARMH)?

Due to the multi-billion dollar cost for a new foundry, Taiwan Semiconductor Manufacturing enjoys strong barriers to entry. Its large capital base lets it make the investments that few other firms can afford to undertake. This helps to explain its fat profit margin of 32.3%, EBIT margin of 36.2% and return on investment of 19.7%.

Conclusion

ARM Holdings plc (ADR) (NASDAQ:ARMH) is a popular growth story, but Intel Corporation (NASDAQ:INTC) is getting its mobile game together and the latest 14nm technology will be an interesting battleground. Given Intel’s decades of experience it looks attractive at its current price to earnings (P/E) ratio around 13. ARM has had a good run, but it will need to fight for its market. At its current P/E ratio around 67, it is too expensive to buy outright and a possible short candidate. Taiwan Semiconductor Manufacturing is more reasonably valued than ARM with a P/E ratio around 16. For investors looking to invest directly in the mobile market, Taiwan Semiconductor Manufacturing is a much safer option than ARM Holdings plc (ADR) (NASDAQ:ARMH).

Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel.

The article Buy Intel and Short ARM? originally appeared on Fool.com.

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