Tuesday, January 18, 2011

Intel Looks Like A Value Play

I was reading through Intel’s earnings report and was pleasantly pleased with the company’s results. Everything was great in the report except for the stock movement. The fact that Intel only trades at $21 may represent a great buying opportunity for long term investors.

Intel’s revenue increased 8 percent to $11.5 billion. The company had earnings of 59 cents per share. Intel’s results were great across the board. The company’s gross margins were high coming in at 67.5%. Intel was even more optimistic about next year’s earnings with the company expecting revenue of 11.5 billion dollars next quarter.

The company is forecasting record earnings next year as well. The CEO is predicting that the stock will have its best year in history. That’s saying something after a quarter in which the company had a phenomenal earnings report with net income up 48%
Intel still has a tremendous balance sheet with over $16 billion dollars in cash and just $2.5 billion dollars in debt. Intel looks like a value play at its $21 price with its large amount of free cash flow and double digit earnings growth rate. Add in the McAfee acquisition and there is no reason why Intel cannot continue to thrive.

The stock currently has a 3 % dividend yield with a lot of room to rise. Shares look like a bargain with the stock trading at just 10 times earnings.]

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  1. As a newer investor i'm very happy to see this analysis. I have been looking @ Intel since November.
    Perhaps the fact I am in IT was swaying me some, but the numbers seemed nice all around - especially the entry price. Intel is the dominant chip manufacturer out there with no other companies seriously challenging its supremacy.
    I should buy some of this for our RRSP portfolio.

  2. Thanks this post..
    keep writing your blog will be more attractive. To Your Success!

  3. Hi, Buy Like Buffett,

    I guess that means you'll soon be on Intel's Board of Directors? :)

    Just kidding, but that's how Buffett manages what he buys.

    I don't know about "value," because I'm a skeptic who doesn't believe you can predict the market. You're far from the only person looking at Intel. What do you see that others don't? If the managers of hedge funds, mutual funds, and pension funds aren't bidding its shares up higher, why do YOU think it's worth more?

    Don't mean to give you a hard time, but I'm amazed at how many people don't seem to realize they are competing with billions of dollars of hardware and proprietary software. They think they can scan Yahoo Finance in the evening and find bargains before the pros around the world who have been studying the markets since 4 AM.

    However, the 3% dividend caught my attention. That is a high yield for a stock these days. Last I checked the S&P 500 as a whole was just over 1% and only the S&P 500 members that paid dividends about 2.5%.

    By the way, I've read that in his old age Ben Graham "converted" to the Efficient Market Theory. I don't believe in efficiency, but I do believe the market is unpredictable.

  4. is it possible to trade in common stocks directly with another party who wants to sell those stocks

    the only costs you have to pay is the tax on dividend and a percentage fee for the transaction

  5. You are assuming that the hedge fund managers are always correct. These are the same guys that needed the government to bail out their companies because of poor bets. Actually, I study the markets at 4am. i do this for a living.

  6. Yes, you could negotiate a transfer with someone but I doubt that will be cheaper than just buying shares on the open market.


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