Recent Buy
by The Stoic Investor
Today I had a limit order filled for INTC. I picked up an additional 50 shares of Intel for 19.50 a share. This gives me an average share price of 20.83. This is close to the price of Intel a year ago when I first started watching it. I only had to wait a year to get a chance to own these shares at a price I was willing to pay. I’m nothing if not patient. Having said that how do I know that INTC will not drop more? That is easy to answer: I don’t!
An earnings miss is what started INTC’s price drop over the last three weeks. Then we had the overall market dip after the election. Now we have news the CEO will be retiring in May of next year. Wrap all this up in continued pessimism that Intel will not be as competitive in the post pc era and you can see why there has been a downward trend in price over the past couple of months.
Any time I put my capital into an investment I look at it in terms of years not quarters. This helps me to sort out what is relevant and what is “noise”. I think INTC has hurt itself short-term by not aggressively moving into the mobile market. I believe management now realizes this was a mistake as well. Companies are run by humans and as such they sometimes make poor choices. As with individuals, if a company learns from its mistakes and moves forward then progress can be made. I think Intel has the financial strength to continue spending on R&D as well as acquisitions. If management can adapt to the change in consumers preference for mobile devices then I believe Intel will continue to be a player in the tech sector.
What do you guys think? Is it time to buy INTC or is it a washed up company with its best days behind it?
Stoic,
Nice buy! I would add more myself if I didn’t already have so many shares. INTC should be a solid play for the long term. Even if mobile doesn’t work out, the shift towards 20 nm and below should have INTC in the driver seat with their world class fab/manufacturing capability. It’ll be interesting to watch this arms race to get smaller play out in the near future.
FI Fighter– It will be interesting indeed…
Great patience! Waiting a year for an attractive price is tough. How long has your limit order been outstanding?
And even if INTC doesn’t move into mobile (which I agree they will), will people really stop buying PCs? I’m sure if management said they were downsizing, cutting R&D, and turning into a cash cow until the need for their product died – you’d still end up with an attractive return.
It wasn’t very long. I don’t get to watch the markets daily like once did (damn job!), so I have been using limit orders to my advantage.
Great purchase — I would also buy more INTC if I had the cash.
By the way, you might be interested in a very good article on INTC over at Seeking Alpha by Samir Patel:
http://seekingalpha.com/instablog/4581471-sa-editor-samir-patel/1286801-intel-inside-track-on-the-next-decade
DGM, Thanks for the link. I will have to check it out.
Investing in INTC is a difficult call. There’s the financial view of the company and then there is the Wall Street view.
Wall Street will leave a tech company for dead if it isn’t in the first wave growth phase. This is a statement of how they invest in technology. Look at how Apple is being treated. It’s about what’s next, not how much more money they will make in existing products (and it will be a lot more money).
The average Wall Street money manager doesn’t understand tech anymore than the above statement. They don’t consider financials. Are they wrong? It doesn’t matter because you shouldn’t fight the tape.
INTC is now 5X free cash flow. They should be valued less that a similar company because they use a lot of cash for capital expenditures (about half, or 10B). The dividend is 4.6% plus they are buying back stock. There is a good case here for investing based on the financials.
Don’t expect investors to fall in love simply because it’s cheap. There will need to be some fundamental shift (higher sales, mobile inroads) to get this stock moving again. Then it will get upgrades and start moving up.
SFI, I think about this often, does it matter that a company is solid or what Wall Street thinks? The money is made or lost on what Wall Street thinks. However, it seems to me that WS has a short attention span and what seems horrifying this quarter may be completely forgotten by this time next year. I make most of my investments with a longer view.
Stoic,
Solid buy here. I’ve been strongly considering adding to my position as well. It’s already larger than I’d like, so I don’t want to go too crazy with INTC here.
I’m a little concerned that they haven’t made larger advances in the mobile space, but they still have a very strong server and PC business. The server business stands to gain from continued expansion of The Cloud. I do think their products will eventually gain traction in the mobile space, but ARMH has a significant lead here. We’ll see how all of this goes. ARMH licenses their technology, while INTC actually designs and builds their products. “Build it and they will come?”.
I may still add to my position. This is a solid value play, as the fundamentals haven’t really deteriorated. It’s not a lack of fundamentals here, but rather uncertainty that is punishing the stock.
Best wishes!
Thanks for stopping by DM. I think INTC still has a few tricks up it’s sleeve even if it is considered by some to be an old dog.