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Intel / INTC?
Old 01-23-2009, 10:57 AM   #1
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Intel / INTC?

I mentioned in another thread that many of the "beat down" stocks that may look like bargains have high debt, and I consider those too risky for my portfolio.

Today, I noticed that Intel ( INTC ) has about 5x more cash than debt, is paying a 4% plus dividend, PE ~ 14x, and trading at about half its 2 year highs.

Obviously, a slow computer market means trouble for Intel, but is this all priced in (and maybe overdone?). I've also heard that as netbooks catch on, the cheaper CPUs in those (Atom?) puts a crimp on margins for Intel. I'm thinking that a 4-5% stake in this might be prudent.

I'm also impressed that Intel was able to take on the threat from AMD. I think that is an indication that while they are a mega-corp, they are not exactly a dinosaur.

Thoughts?

BTW, I'm not a fan of individual stocks, but if we are truly in an overdone downturn (who knows?), there might be some opportunities. And if I approach it cautiously, I figure I probably won't have too much risk of underperforming (famous last words!). But yes, diversification is a given for me.

TIA -ERD50
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Old 01-23-2009, 11:03 AM   #2
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The also provided "lousy" future guidance which usually means the stock price will fall. I guess computers are not selling too wall (market saturation?).
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Old 01-23-2009, 11:05 AM   #3
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Sure.

However, the entire semiconductor sector got beaten down. Look at other leaders in this sector, like TXN, ADI, NSM, etc... They all track. Yet many cater to other electronics markets, not just PC.

So, to play this sector, an ETF like SMH is a safer play, in my view.
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Old 01-23-2009, 01:57 PM   #4
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The also provided "lousy" future guidance which usually means the stock price will fall. I guess computers are not selling too wall (market saturation?).
Generally, the market's *current* price on a stock reflects *future* expectations. So I don't think any lousy future guidance would mean the stock price will fall - it usually means it already has fallen to reflect that guidance. Right?

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So, to play this sector, an ETF like SMH is a safer play, in my view.
Good idea - I'll check out SMH - here we go - looks like it tracks INTC pretty, very closely, almost the same volatility, but divs ~ 2.8% (just taking the annual divs devided by current price). But, you would lessen the single company risk a bit, which means I maybe could take on a bit more if I chose.



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Old 01-23-2009, 02:15 PM   #5
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Assuming they do not come in UNDER guidance again; which I believe they just did.
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Old 01-23-2009, 02:31 PM   #6
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Assuming they do not come in UNDER guidance again; which I believe they just did.
But I can't know the future.

All I can do is try to guess whether I think market sentiment has over-shot the likely reality. And can I do that w/o taking on excessive risk.

This is reminding me why I don't play much in individual stocks anymore


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Old 01-23-2009, 02:43 PM   #7
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Me too. Wonder what impact this will have since it not the "traditional" change of power there: Bloomberg.com: Worldwide
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Old 01-23-2009, 06:30 PM   #8
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How about buying call options, particularly far-out LEAP to limit your downside risk?

I have toyed with this strategy since the early 2000s, using less than 1% of my portfolio for this game. Barely broke even because my timing was lousy; personal fear/greed sentiment tracked market instead of being 180deg out-of-phase as it should. Have lost all of that play money last year.

I am pondering about using that strategy again, mainly to get some gains if the economy recovers, while limiting the downside risk to capital. This is the same barbell strategy that Taleb described in his books. Sadly, execution is everything.
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Old 01-23-2009, 06:44 PM   #9
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With VIX at historic high levels, I suspect you will find options to be a priced very high.

per Yahoo - INTC @ 13.12, JAN 2010 15 strikes are going for $1.73. INTC would need to hit 16.73 to break even, assuming you hold to expiry. 27.5% gain just to break even.

Could be the deal of the century, but I'd be more likely to buy INTC, and sell the OTM calls on it. I could get $0.60 for an April 15 strike. 4.5% gain from that no matter what INTC does, with only an opportunity loss if it does go above 15.6 by that time, which wouldn't be bad anyhow (18,9% gain in 3 months).

No downside protection though. Some people like to do collars for that. I rarely do, maybe just to hold through an earnings report or something.

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Old 01-23-2009, 09:27 PM   #10
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If you like INTC at a PE of 14, you should love Microsoft. at a PE of 9

It seems like Microsoft and I am the only ones buying their stock right now.

They just keep on printing their money. The financial meltdown has hammered their earnings, reducing them to .47/per share from .49/share.

Am I the only one who doesn't think they are in crisis?
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Old 01-23-2009, 09:55 PM   #11
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If you like INTC at a PE of 14, you should love Microsoft. at a PE of 9

....

Am I the only one who doesn't think they are in crisis?
Some similarities in their charts and their stats. And I wouldn't quite say MSFT is "in crisis", but I do tend to think they are too bloated and self-centered to navigate very well.

Ballmer said no one would pay that much for an iPhone. I'd have to look it up, but iPhones have a pretty good share compared to Windows phone OS.

here it is...

Gartner Says Worldwide Smartphone Sales Reached Its Lowest Growth Rate With 11.5 Per Cent Increase in Third Quarter of 2008

Apple surpassed Windows OS in smart phones late in 2008.

Ballmer laughed at the iPod model - claimed that MSFT would do better by offering the software ("Plays for Sure") and letting all their partners innovate the hardware. When that didn't work, Ballmer went back on this and released the Zune, which isn't a bad player, but hasn't done much in the market. Oh, Zune is incompatible with "Plays for Sure" content.

Vista has had it's problems in the market, and I don't think their response to the problems (actual or perceived) has been very well orchestrated.

OTOH, Intel seems to keep churning out generation after generation of better CPUs that seem to be pretty well received.

I could certainly be wrong, but INTC seems like a better investment than MSFT.

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Old 01-25-2009, 02:39 AM   #12
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The thing is, Microsoft doesn't need to sell phone OS or Zune stuff. Those are pretty much meaningless to their results.

The Vista issues are real, but ultimately they don't matter to the bottom line either.

At the end of the day, if a Fortune 500 company buys a computer, it has a Microsoft OS on it, and it has Microsoft Office on it. It connects to Microsoft servers running a whole lot of Microsoft back end software.

I'm not saying INTC is a bad choice. I would expect them to do well.
Apple should also do well.

Given their current prices though, I bet MSFT does better

MSFT 17.20
AAPL 88.36
INTC 13.12

Let's check back in 5 years.

Of course, I think the best play may be to just buy all three and call it good.

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Originally Posted by ERD50 View Post
Some similarities in their charts and their stats. And I wouldn't quite say MSFT is "in crisis", but I do tend to think they are too bloated and self-centered to navigate very well.

Ballmer said no one would pay that much for an iPhone. I'd have to look it up, but iPhones have a pretty good share compared to Windows phone OS.

here it is...

Gartner Says Worldwide Smartphone Sales Reached Its Lowest Growth Rate With 11.5 Per Cent Increase in Third Quarter of 2008

Apple surpassed Windows OS in smart phones late in 2008.

Ballmer laughed at the iPod model - claimed that MSFT would do better by offering the software ("Plays for Sure") and letting all their partners innovate the hardware. When that didn't work, Ballmer went back on this and released the Zune, which isn't a bad player, but hasn't done much in the market. Oh, Zune is incompatible with "Plays for Sure" content.

Vista has had it's problems in the market, and I don't think their response to the problems (actual or perceived) has been very well orchestrated.

OTOH, Intel seems to keep churning out generation after generation of better CPUs that seem to be pretty well received.

I could certainly be wrong, but INTC seems like a better investment than MSFT.

-ERD50
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Old 01-25-2009, 03:41 AM   #13
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I dunno, I think aapl may not live up to the luster of recent with Jobs stepping back. Nor do I think that the iphone will end up the winner in the game of business phones. My wife has one, and I have a smartphone with mobile win 6.1. She does not work outside of being a SAHM, so for her its a toy, not a tool. I cannot type an email on her phone due to the difficult keyboard/pad/touchscreen that you have to touch with a finger (not a stylus or pen). Hitting the wrong character with an electrostatically charged finger is a chronic problem.

My smartphone, on the other hand is more of a tool. I catch up on email while riding in a taxi across town to my next meeting. Keyboard is not perfect but better. I have real Excel, Word and PPT. I'm trading up soon, and will stick with a smartphone...though about an iphone for about a nanosecond, but gave up on that thought real quick.

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Old 01-25-2009, 10:33 AM   #14
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The thing is, Microsoft doesn't need to sell phone OS or Zune stuff. Those are pretty much meaningless to their results.
True, but I used those examples to show that I don't think they are as limber as they need to be to compete with new challenges. And I'm not saying Apple is their biggest threat, just that they have outmaneuvered them in a few of these areas.

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I'm trading up soon, and will stick with a smartphone...though about an iphone for about a nanosecond, but gave up on that thought real quick.

R
I'm a bit surprised the iPhone has been as successful as it has been. IMO, there are major shortcomings/limitations in the product. But, it has done well in spite of these things.

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