Barron's came out with an article this week on Intel. Many think of Intel as a dinosaur about ready to go into extinction. That's the kind of thinking I love – at least in the short term. It provides an opportunity to buy good value at a reasonable price. Blue light special, isle 9!
With the semi stocks shooting through the roof, lots of investors only want the “sexy” semi-conductor stocks. In typical market fashion, the fast moving stocks are being chased by most investors leaving some pretty nice values in the “trash bin”, like Intel.
The chasing of the sexy stocks reminds me of high school when most of the guys were fixated on the prom queen and ignored a lot of up and comers. Turn the clock a few years later and the prom queen was far from the one that most would like to date.
This is not to say that Intel doesn’t have some issues. It does, but it also has a lot of strengths. Every stock has good points and bad points. Like any decision in life, each person has to weight the good against the bad. There is no free lunch.
Intel has been struggling with manufacturing at smaller and smaller levels. Historically, they have solved their issues and come back strong. Intel’s strengths are it produces 80% of the world’s CPU’s, it has a 94% share of CPU’s in servers and it has strong financials.
Some may say, “It’s different this time”, but that statement is as old as equity markets. Those confident projectors of the future are usually made by the young with few if any market cycles under their belt. While things change over time, change is usually evolutionary versus revolutionary.
At a P/E less than 9, I like Intel. For a time-tested company, its multiple is way less than the market. Will I have to wait? Absolutely! I waited in 2011 with Nvdia and we’ve seen how that wait has been turning out.
