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The Big Opportunity for Today's Risk-Shy Tech Investor

By Larsen Kusick, analyst, Phase 1 Investor
Monday, February 28, 2011

"You're the only company that I know of whose Asia growth rate was slower than its overall company growth rate."
As Growth Stock Wire readers know, Hewlett-Packard dropped a bomb on investors last week. While my colleague Frank Curzio pointed to the booming tablet market as the source of HP's woes, there's another side to this story that tech investors MUST understand.
The quote above came from a question during HP's conference call, where analysts scrambled to figure out what went wrong. The PC market is still growing at a double-digit pace in Asia. But HP said its sales in the Asia-Pacific region were up a mere 7% for the quarter.
While many investors still look at Asia as risky, they don't realize it's the best market in the world for big U.S. tech companies. And investors can find big, safe, U.S.-based ways to profit.
Take World Dominating semiconductor-maker Intel, for example. In 2010, Intel's revenue from its Asia-Pacific segment totaled a whopping $25 billion. That's more than 57% of the company's global sales.
Below is a table showing some of the best-known U.S. tech giants along with their exposure to Asia, based on the most recent quarterly filing. You can see which companies have the most exposure to Asia, as well as how fast the Asian segment is growing.
Market Cap
% Sales from the Asia-Pacific Region
Asia Sales Growth vs. Last Year
$317 billion
$164 billion
$117 billion
$102 billion
$93 billion
(Hewlett-Packard doesn't fully disclose its results by geographic regions. That's why you see an "N/A" there.)
Clearly, some U.S. tech giants are winning the battle for the Asian market. Intel and Apple, for example, have solid, high-growth businesses there. Cisco and Hewlett-Packard are near the bottom of the list in terms of growth. Even though the stocks are cheap – trading around 10 times forwards earnings – their lack of growth in Asia makes them less attractive.
Like most industries, the biggest future growth market for "big tech" is Asia. That's why I recommend focusing on companies that have committed major resources to the region, and are enjoying the benefits of those investments. Right now, the two winners here are Intel and Apple... and they're both relatively cheap.
Good investing,

Further Reading:

Consumers are veering away from conventional laptops in favor of the more popular "tablet" computers. But instead of shorting these big-cap tech giants, Frank recommends a safer bet right now. See how to capitalize on the changing tech sector here: The Death of the PC Industry.
In China, millions of people are upgrading to 3G. The government is set to spend nearly $600 billion over the next five years on emerging industries… Investing in this information technology trend right now is a no-brainer. Read more here: Forget Commodities... This Is the Next Big Trend in China.

In The Daily Crux
Market Notes
U.S. dollar hits new low vs. Canadian dollar... its lowest level since March 2008.
Independent oil and gas giants Devon and Chesapeake jump to fresh 52-week highs.
Blue-chips Wal-Mart and Johnson & Johnson both sit at three-month lows.
Cisco competitor Juniper Networks soars more than 60% in six months.
Market Watch
Symbol Price
S&P 500 1319.88 +1.1% +19.7%
Oil (USO) 39.68 +1.8% +4.1%
Gold (GLD) 137.38 +0.7% +26.8%
Silver (SLV) 32.56 +4.4% +106.5%
U.S. Dollar 77.09 -0.4% -4.7%
Euro 1.37 -0.4% +1.5%
Volatility (^VIX) 19.22 -9.9% -4.4%
Gold Stocks (^HUI) 555.12 +2.3% +38.5%
10-Year Yield 3.42 -0.6% -6.0%

World ETFs
Symbol Price
USA (SPY) 132.33 +1.1% +21.4%
Canada (EWC) 33.18 +1.8% +29.8%
Russia (TRF) 23.43 +2.0% +26.6%
India (IFN) 29.59 +1.2% +13.7%
Israel (ISL) 16.66 +1.0% +11.4%
Japan (EWJ) 11.42 +1.3% +16.4%
Singapore (EWS) 13.17 +2.2% +22.7%
Taiwan (EWT) 14.63 +1.4% +27.4%
S. Korea (EWY) 58.50 +1.2% +29.2%
S. Africa (EZA) 68.31 +1.9% +31.7%
China (FXI) 41.84 +1.7% +9.0%
Lat.America (ILF) 51.89 +1.0% +20.0%

Sector ETFs
Symbol Price
Oil Service (OIH) 163.35 +3.0% +37.8%
Big Pharma (PPH) 64.87 +0.3% +3.6%
Internet (HHH) 76.43 +0.4% +41.1%
Semis (PSI) 18.06 +2.5% +38.9%
Utilities (XLU) 31.76 +0.6% +11.7%
Defense (PPA) 20.02 +1.0% +15.7%
Nanotech (PXN) 10.20 +1.3% +6.5%
Alt. Energy (PBW) 10.87 +0.7% +14.5%
Water (PHO) 19.66 +1.4% +20.6%
Insurance (PIC) 17.05 +1.2% +23.7%
Biotech (PBE) 21.10 +1.4% +19.3%
Retail (PMR) 20.03 +1.3% +24.9%
Software (PSJ) 26.58 +1.9% +27.2%
Big Tech (QQQQ) 57.65 +1.4% +30.2%
Construction (PKB) 13.62 +1.3% +23.5%
Media (PBS) 15.17 +2.1% +25.0%
Consumer Svcs (IYC) 70.41 +1.0% +25.5%
Financials (IYF) 60.25 +1.5% +16.4%
Health Care (IYH) 67.38 +1.0% +6.4%
Industrials (IYJ) 69.63 +1.2% +31.6%
Basic Mat (IYM) 78.58 +1.6% +35.3%
Real Estate (IYR) 59.34 +1.8% +34.2%
Transportation (IYT) 91.70 +1.0% +24.8%
Telecom (IYZ) 23.12 +1.5% +28.1%

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