Computer Hardware Stocks

About Computer Hardware Stocks

Hardware is where good products meet mediocre economics. These companies ship physical goods with a bill of materials behind them, so gross margins run at a fraction of software's and the market values them accordingly.

The spread inside the group is enormous, though. A branded device maker with services attached to a vast installed base earns genuinely good returns. Server builders often pass through the expensive parts they buy, so revenue can grow spectacularly while profit barely moves, which flatters the top line and catches people out. Drive and memory makers are a straight commodity cycle wearing a technology label.

Own these for cash returns and cheapness rather than growth, and check how much of the revenue is the box against how much is the software and service wrapped around it. That ratio is most of the difference between the compounders here and the value traps, and the two look identical on a screener.

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