Intel Corporation (INTC), Apple Inc. (AAPL): Utilities to Outperform Semiconductors?

Smartphone sales slowing

The bigger hit on the semiconductor sector, and the most likely explanation for the drop in copper prices, has been the slowdown in smartphone sales.

Samsung shed $12 billion in market cap as sales of high-end handsets lagged behind expectations, although cheaper models enjoyed brisk sales worldwide. But with copper demand falling, falling sales of mid- to low-end models will likely follow, squeezing already tight margins in this space. News of Samsung’s miss hit smartphone component makers hard, discounting such stocks up to 11% in a single day.

In addition, Apple Inc. (NASDAQ:AAPL)’s underwhelming World Wide Developer Conference will have done little to excite investors looking for something fresh in the hardware space, or at the very least, an exciting iteration of an existing product to encourage an upgrade cycle.

Summary

With little on offer from leading technology manufacturers, it will be hard for the Market Vectors Semiconductor ETF (MUTF:SMH) to continue its trend higher. The semiconductor industry had factored for such weakness by reducing demand for copper, but investors in the space had apparently ignored the memo in the hope of something better. Until there is some stabilization in copper prices, it’s probably best to take some profits off the table.

Meanwhile, there is no love for Utilities, but the economic climate for the sector remains favorable and stocks in the sector trade at attractive discounts.

With the various indices moving away from their highs in a more concerted manner, now is a good time to reassess the portfolio: cut the underperformers, take profits on the outperformers, and start looking at where the next opportunities lie.

Declan Fallon owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel Corporation (NASDAQ:INTC).

The article Utilities to Outperform Semiconductors? originally appeared on Fool.com.

Declan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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