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djshagggyd (72.81)

The Smelloscope takes a long hard whiff of Intel

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January 13, 2011 – Comments (5) | RELATED TICKERS: INTC , AMD , ARMH

'Twas at a price of 20.94 on the fine day of 1/6/11 when I smelt the value of Intel:

-A ttm P/E at a 49% discount to it's own 5 year average and a 59% discount to it's 7 closest competitors.
-A p/b lower than the industry average with a book value per share steadily increasing over the last 5 years
-A gross margin which is beating the industry average and it's own 5 year average
-A ROE%, ROA%, and Net Profit margin which are fairly consistent (for a cyclical stock) over a 10 year period
-A ROE%, ROA%, and Net Profit margin which are beating the industry average
-A solid moat
-Minimal short interest
-Good insider activity
-Price to Free Cash flow the lower than it's closest competitors
-A very reasonable Price to Sales ratio with low long term debt
-A very good dividend which yields much higher than it's competitors and has been steadily increasing over time

 

For it's Smelloscope score INTC gets  76 out of 100 points... which is the most favorable scent the Smelloscope has picked up on yet! (to date, the Smelloscope has whiffed 40 stocks)

 

To sum it up:

Intel has been dealing with events lately which most investors see as bad news. 

For instance, they just paid NVDA a huge amount of cash in a court settlement. 1.5 Billion dollars to be exact. It's a scary number. But Intel has a lot more where that came from. And the upside is that all of it's legal disputes with NVDA are finally over. Not only that, but now INTC has permission to use NVDA's full range of patents legally any time it wants.

Some other "bad news" is that ARMH has officially entered into the ring with INTC. The creeping shadow of ARMH has caused unreasonable fear among semi-conductor speculators. The fear is that Intel's moat has been penetrated... and that they won't be able to compete in a mobile "cloud computing" world. A world in which supposedly powerful processors will no longer be in high demand. I very much disagree with this line of thinking.

The processors that INTC makes are far superior to the processors that ARMH makes. If Intel wants to compete in the lower quality processor market they will do it. And they will do it better than anyone else. (which is why I don't think they mind paying for NVDA's patents... but that's another story

Another reason not to worry about ARMH is that Intel has already been sharing the low-end processor market with AMD for a long time. And look how AMD has faired. In fact AMD's CEO just took off running! 

Maybe he looked at Intel's 116 billion dollar market cap machine and wet his pants

(note: The stankometers on the Smelloscope did not actually indicate any pant wetting by AMD's former CEO)

I believe these events and others have kept Intel's stock price unreasonably depressed. Intel is a solid company. They're making money at an increasing rate and poised to continue doing so for years to come. Eventually Mr. Market will reflect the true value of Intel. Until then... I'll sit back and enjoy the increasing dividends. 

~djshagggyd

Full discloser:

I own INTC and bought more on 1/11/11 because it smelled so good

TheSmelloscope is a value rating system created to evaluate stocks for fun. It's operated by a novice investor named djshagggyd. NOVICE being the key word. Do not take Smelloscope advice without conducting your own due diligence. Thank you for taking the time to smell. Feel free to take some ear candy from the dish on your way out.

5 Comments – Post Your Own

#1) On January 13, 2011 at 8:00 PM, djshagggyd (72.81) wrote:

UPDATE:

Check out this article. INTC shares up in after hours trading. 

Thanks to HarryCarysGhost for pointing it out to me. 

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#2) On January 13, 2011 at 8:48 PM, HarryCarysGhost (99.76) wrote:

No problem,

the Smelloscope did not actually indicate any pant wetting by AMD's former CEO

Well I'm sure there was some pant wetting going on somewhere in the boardroom after that bizzaro move... : )

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#3) On January 14, 2011 at 1:44 AM, djshagggyd (72.81) wrote:

Haha... yeah, you're probably right!

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#4) On January 14, 2011 at 11:18 AM, EnigmaDude (98.06) wrote:

I agree with you and so does Reuters.  They rank INTC a 10 and it is only one of 183 stocks that deserve a 10 rating.  I just added some shares and this stock is now my largest holding in my IRA.

Don't you just love the smell of napalm in the morning!

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#5) On January 14, 2011 at 1:37 PM, djshagggyd (72.81) wrote:

Glad to hear you agree about Intel EnigmaDude! I'm surprised that their stock is down today after the good earnings report. Lastnight I heard that the stock was "surging" in after hours trading. -1% doesn't sound like a surge to me! Haha... I'm sure things will turn around eventually. 

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