Amazon, Microsoft, Intel and IBM: Why These Stocks Matter

NEW YORK (TheStreet) -- One of my weekly investment chores is to keep an eye on the most widely followed and often-tracked stocks. On Monday it amazed me that Amazon.com (AMZN), which has a three-month average daily volume of 2,757,920 shares, traded over four million shares. Yet, other widely held behemoths like Microsoft (MSFT), IBM (IBM) and Intel (INTC) weren't garnering anywhere near the average daily volume.

What do all these stocks have in common? Except for Amazon they have been or are in a correction mode. Microsoft (a.k.a. "Mr. Softy") turned around only six weeks ago and traded on Monday to a new 52-week high of $38.78. Again, except for Amazon, IBM and Intel were correcting on sluggish volume.

Amazon and Microsoft have been market darlings before and after our U.S. Thanksgiving holiday. That's partly because they sell a lot of valuable items that holiday shoppers crave. From its Xbox game consoles to its Surface tablets, Microsoft has the earnings generators that investors like, plus the hope that someone more inspiring than Steve Ballmer will lead Microsoft back to its glory days.

Amazon is an anomaly among these four titans because it sells at outrageously high multiples (PE ratio) to its current and forward earnings. Is the stock really worth nearly $400 a share? Even though Amazon finished Monday slightly lower, the volume tells us that people still want to bet on this "racehorse" among online retailers. The other three companies don't get quite the respect or the valuation that Amazon is given. But Microsoft, Intel and IBM have two important qualities that investors are hungrily shopping for.

They pay a dividend: IBM has a 2.14% yield-to price, Intel offers a 3.8% yield and good old Mr. Softy at current levels offers a 2.91% yield. Also, these three are trading at PE ratios that are around 10% below the average PE ratio for the already high S&P 500 index. Microsoft has a forward  PE of about 13, Intel's is about 12.5 and the frequently-shorted IBM has the lowest forward PE ratio of the three at slightly below 10.

Here are some dividend-paying stalwarts -- all three of which are components of the Dow -- trading close to bargain pricing. They are "brands" that are well known, enduring and trusted for innovation and production. If you believe the stock market is going higher and that a "rising tide lifts all boats," then Microsoft, Intel and IBM pay you to ride them to higher tides.

Having mentioned in a recent article that I anticipate both Microsoft and another popular stock, Apple (AAPL), will correct a bit before continuing their ascent higher, I'm also wondering if two of the "dogs of the Dow," IBM and Intel, will do the same. In spite of all the street talk that IBM is losing business to "the cloud" and Intel's race to catch up with the demands of the mobile device manufacturers, both companies many ways to make money and have recurring streams of operating cash flow.

As for Amazon, perhaps the sky's the limit. On 60 Minutes Sunday night, CEO Jeff Bezos demonstrated that the company is "testing drones" for same-day package delivery. Sunday delivery for "prime" customers using the U.S. Postal Service wasn't impressive enough? Now I have visions of ordering a product at Amazon.com and within hours a drone missile flies down my chimney and delivers its payload to our shock and awe.

What will they think of next?

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial editor, he specializes in unique investment strategies, overlooked stock investments, energy and resource companies, precious metals, emerging growth companies, the prudent use of option strategies,real estate related opportunities,wealth preservation, money-saving offers, risk management, tax issues, as well as "the psychology of investing". Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the ¿herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

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