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Time to sell Intel? (and buy in a year or two)?

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January 14, 2011 – Comments (13) | RELATED TICKERS: INTC

Not an iota of Fundamental Analysis on this one. But I was looking at Intel's chart and just seeing how much of a boring trading range it stayed in the last several years. But then I zoomed out to 12 years and saw some interesting relationships.

It has clear support levels at 15 and 12. And it has clear resistance around 22, but more importantly it is following a downsloping trendline established over the last several years.

So, sell INTC now? Wait a year or so until it gets to 15 and buy it again?

Not flashy. But that's sort of the appeal right? A nice reliable chip manufacturer, putting out excellent reliable chips, but not being all hyped up and flashy like other tech companies everyone seems to be ga-ga for these days (cough AAPL, cough GOOG), and putting out an excellent reliable cyclical stock movement.

I might try this one out.



ENLARGE

Disclosure: No position in INTC

13 Comments – Post Your Own

#1) On January 14, 2011 at 1:10 AM, awallejr (81.44) wrote:

Why?  The stock is already selling near its 52 week low than its 52 week high.  It just crushed projected earnings and is predicting even better this year.  It is estimated to earn conservatively $1.80 per share this year, tho probably more.  And pays a pretty decent dividend. So why in the world will it drop to $15 per share?  Simply because it did in the PAST?  This is why I can't take any long term chart reading seriously.  You simply won't be seeing INTC selling for $15 per share in a year or two absent any FUNDAMENTAL change.

I wish it would drop to $15, I'd load up the boat if it did. 

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#2) On January 14, 2011 at 1:17 AM, Momentum21 (74.35) wrote:

binve - I am circling my little HAWK friend again. it is back in range...

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#3) On January 14, 2011 at 1:20 AM, awallejr (81.44) wrote:

In addition. show me a 2 year chart.  And what will you see? A stock steadily rising then correcting and rising again.

Binve stay a bear,  The day you become a bull is the day I sell heheh.

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#4) On January 14, 2011 at 2:06 AM, djshagggyd (74.30) wrote:

Haha... I'd have to agree with awallejr on this one. I picked up my first shares at $15. And I picked up somemore a few days ago for $20. I just wrote a pitch about why now is a good time to buy. I'm kinda proud of it actually... probably my first decent CAPS pitch.

I agree that Intel does seem to have a boring trading range... but if you really dig into the fundamentals... it looks like there's some some serious growth waiting to happen. Plus there's a steadily increasing dividend with a perfect track record.

Seems like a "buy" to me. But I'm pretty inexperienced and know basically nothing about technical analysis.

Have a good night! 

~justin 

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#5) On January 14, 2011 at 1:09 PM, EnigmaDude (86.56) wrote:

Wow - this post illustrates why technical analysis without considering fundamentals is a flawed approach to investing.  In 2 years you won't be able to touch Intel stock for less than $25 and the dividend will have grown considerably.  I just added to my long position and plan to hold for at least 10 years.

But thanks for pointing out the bearish viewpoint!

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#6) On January 14, 2011 at 4:16 PM, Option1307 (29.84) wrote:

Agreed.

INTC has been "undervalued" for years (range bound seen 2002) and essentially gone nowhere. I have nothing against Intel and think it's pretty well run, but I wouldn't touch it unless it was at least in the $15-17 range.

But hey that's just me...

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#7) On January 14, 2011 at 4:44 PM, TheDumbMoney (45.26) wrote:

I am confused by this.  FIrst, just looking at technicals, you have chosen to begin your trends at the absolute all-time high for INTC during the dot-com bubble.  That is totally arbitrary.  One might just as reasonably begin the chart a year to a year-and-a-quarter ealier, or five years earlier, or three years later, exclude the entire dot-com mania with which you begin your trend lines, and you would see a modest upward trend from that day on to this.  For Pete's Sake, in 2001 INTC had a P/E ratio of over 100, and traded at 24 times its free cash flow!  Mania. 

More fundamentally, I think it's important to look forward, not backward, in general.  INTC just had its best 4th quarter ever, and its best year ever, and its most free cash flow ever.  It's a megacap and its earnings were up 166% from last year (a low point, admitedly, for obvious reasons), and 75% excluding the charges (see same link). It just posted its highest gross margin ever.  It was a blow-out report, and yet the stock is down.  Why?  Because if you break out consumer PC chips, those had flat revenue growth.  What has happened to INTC over the period of that chart you posted?  -- it spent eight or so years growing into its absurdly lofty valuations, and just about when it had done so, smart phones and iPads came along and convinced everyone INTC could never grow again.  The recent flat PC chip revenue has affirmed these fears.  But dividends are growing, cash flows are phenomenal.  Maybe INTC is not the strongest buy in the world, but it's at least a hold.  I bought at $13/share, and am kicking myself for not buying when it recently went below $18. 

At this price, and this is relating to the worry in the above paragraph, here are the only rationales in the world for selling INTC, period: 1) you believe that the smartphone and mobilie computing explosion, of which INTC is not really yet a part, will cause consumers (and worse, businesses) to replace aging desktops and laptops with iPads (replace, not just add an iPad) and 2) even if that is so, you additionally believe INTC is ultimately incapable of finding a profitable way to compete in that market; and/or 3) separately you believe that because MSFT will now make Windows compatible with ARM chips, ARM will do a vasly better job competing against INTC than AMD has done, and that ARM and/or AMD can steal significant portions of INTC's market share. 

 I'm not saying these things can't happen.  I'm just saying, those are reasons to sell INTC, not a chart with trend lines that start at the height of the dot-com bubble.

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#8) On January 14, 2011 at 4:46 PM, djshagggyd (74.30) wrote:

Option-

Yeah, I think investors have a tough time deciding how to categorize Intel. And I think in-turn it keeps the share price lower than it should be.

I'm betting that eventually conservative investors will no longer view Intel as a "tech" stock. In the future I think people who've stayed away from tech related investments will have a change of heart and start seeing INTC the same way they see other valued blue chips.

It's definitely possible I'm wrong. We shall see!

~justin 

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#9) On January 14, 2011 at 4:52 PM, TheDumbMoney (45.26) wrote:

My post sounds more contentious than I meant it to be.  I get into a groove writing, and I post something, and then I actually read it again and I sound too hard-edged.  Sorry about that!

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#10) On January 14, 2011 at 5:00 PM, Option1307 (29.84) wrote:

djshagggyd

Yeah, I think investors have a tough time deciding how to categorize Intel.

Im betting that eventually conservative investors will no longer view Intel as a "tech" stock. 

Totally agree, it is slowly becoming a value/dividend play and people are struggling to make that distinction.

Again, I don't think INTC is necessarily a bad buy, you just need to pick it up at the right price. This is always true in investing, but particularily true for range-bound equities.

I think you mentioned you scooped up some shares at $15, that is a killer price and INTC should perform very well from there. As I mentioned, I would probably be a buyer in the $15-17 range as well.

Best of luck.

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#11) On January 14, 2011 at 5:11 PM, Momentum21 (74.35) wrote:

INTC definitely appears cheap but it is not on my conviction buy list. It is just a flat out underperformer...how could you just assume that is going to change over the next 10 years??

In fairness to binve and his chart, I don't think he is assuming that the market is going to continue forward while INTC drops to 15. Some may believe it unlikely but it is not out of the realm of possibility. 

Some of the above posts seem to be ruling out the possibility of a significant correction. Remember that your risk does correlate with your reward over time...  

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#12) On January 14, 2011 at 5:50 PM, binve (< 20) wrote:

Option1307 and Momentum21,

Thanks for the comments.

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#13) On January 14, 2011 at 6:04 PM, binve (< 20) wrote:

djshagggyd ,

Thank you for the gracious way you agreed to disagree with me on this one.

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