INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale
Companies / INTEL Dec 07, 2021 - 02:38 PM GMTBy: Nadeem_Walayat
INTEL Bargain - 15.5% Discount Sale
The story for Integrated Electronics should have been for it's stock price to soar on CAPEX and Alder Lake processor success (of sorts). Instead the literal FOOLS took what was GOOD news to explain the 15% drop in Intel's stock price.
Fool.com - "The sudden price drop was triggered by the company's significant infrastructure investments"
Yeah, very aptly named fool. com. There are times what the market does something really stooopid by moving in the WRONG direction, this can either be to the upside (Nvidia) or the downside, and where Intel is concerned the markets just got this stock very badly wrong which gave us all 15.5% discount to where the stock was trading pre earnings as it fell from $56 to a low of $47.8, delivering a whopping 15.5% discount, breaching my long standing buying level of $48 and hugging the level for well over a week. And as I indicated earlier I started buying Intel as soon as it dipped below $50, at $49.9 and then again $48.3, tripling my Intel position to 4.5%.and since have continued to buy supplemental bits with likes of eTORRO at sub $50. Intel trades on an EC of 15 (super cheap), PE of 8.9, pays a 2.5% dividend AND buys back stock over time (12% over the past 3 years).
The stock price's buying zone is form $50.5 down to $46 with my long standing buying level of $48 towards the middle of this bargain basement range. Whilst technically Intel could trade all the way down to $44, the last low was $47.7, though with the current price at $51 it's probably gong to have to take a market panic event to materialise. All I know is I will buy more Intel should it drop below $49.50 and in fact I am contemplating another large buy (1.5%) if it trades to below $49.
So what is the smart money is doing?
First let me define who the smart money is because it's not me, you are any of the fund manager talking heads out there, the real smart money are the Intel senior management and what were they doing following the 10% discounting event tells you a lot about whether one is wise or not to be buying Intel.
These insiders are buying shares in Intel with their own cash, not $0 cost options garbage buys that we tend to usually see with the tech giants, which they then go on usually sell on the same day.
So folks we are in good company with our Intel buys. The 3 month buy / sell ratio is 140% (above 100% more buying them selling). As for when Intel management has tended sell that would be at $59 to $66, a net 16000 shares were bought over the past 3 months.
What am I doing?
I already bought at $49.9 and $48.3 and will likely buy more should Intel dip back below $50 and the more it falls the more I will buy upto a limit of about 6% of my stocks portfolio from current 4.5% to sit next to Google's 6.2% and I will likely leave a limit order at $44 for the time being.
Why Intel stock price dropped 15%?
After all the earnings report was good with Intel coming in at an EPS of $2.5 against market expectations of the same $2.5. So what spooked the markets is that which I have WANTED Intel to do for a while which is the INVEST their cash flow INTO building new chip fab plants so that they can compete against Samsung and TSMC. And that is what Intel CEO Gelsinger declared he would do over the next 2 years, he was going to plow a whopping $28 billion into building new chip fab plants, compare that to AMD CAPEX which is likely to to be less than $2 billion over the same time period!
What this implied was possible lower earnings, because Intel was investing it's cash flow. When Taiwan Semi conductors announced something similar their stock price rose, when Intel announced it the stock price crashes by 10%! That is the way of the markets!
Intel is DIRT cheap, for some reason the investing crowd is NOT discounting any rewards from the $28 billion investment, perhaps they think Intel will screw it all up again and result in a total loss much as many of their multi billion dollar projects to date such as high speed Optane memory have gone belliup in recent years. When others such as Google and Amazon do it they are rewarded with high multiples, when Intel does it the stock price crashes. The only thing that explains why it is so is because Amazon and Google don't pay a dividend so investors are focused on GROWTH. Whilst Intel does pay a high dividend and so investors are more focused on dividend cover. If earnings fall due to reinvesting profits then that means dividend cover will be lower and that is probably why Intel stock price fell because to most investors it is primarily a dividend stock, so the risk of reduction in the dividend has increased and so many fund managers re balanced their portfolios away from Intel.
But I don't think investors understand the name of the game that Intel is now playing, for Intel has read the writing on the wall and seen what TSMC have done so have effectively decided to BECOME TSMC! I.e. to produce chips not just for themselves but for anyone just as TSMC does thus prospects are for huge future revenues that implies Intel's valuation could match that of TSMC's, TRIPLE that of today's market valuation and even more so given that it is a US corporation critical to US strategic interests.
And then we have ALDERLAKE! Intel has FINALLY produced something new and not stuck at 14nm++++++++. The 12900k actually can compete against AMD's 5900x! And Intel implies it can compete against the 5950x in select benchmarks.
So what is Alderlake? It's basically a copy of Apples M1 design of large performance cores coupled with smaller efficiency cores so as to keep that important wattage down so they don't over heat and throttle down so that they can be better overclocked depending on ones cooling solution and thus is scoring well in the myriad of benchmark tests when set against the AMD's 5900x and 5950x processors.
Intel's flagship 12900k has 8 performance cores and 8 efficiency resulting in a 24 thread processor that the market will pit against AMD's 12 core 5900x processor, though Intel keeps insisting that it's a competitor for the AMD's 16 core 5950x. Whilst it might beat the 5950s in gaming, a pseudo 12 core processor is not going to beat a 16 core processor in productivity tasks. GAMING and High single thread operations is where Alderlake excels, but there is a price to pay for that which is in power consumption and heat. In terms of which Alder lake consumes DOUBLE the power of AMD's ZEN 3 processors so demands one spends a hefty amount on EXPENSIVE cooling solutions else the chip will throttle down.
But enough on the specs, the bottom line is that Alder Lake is a good generation of processors though if I had the choice I would still go with AMD's 5950x, especially as it's going to cost a lot of extra money for all of the extra hardware that goes along with Alder lake i.e. DDR5 memory..
The bottom line is that as investors we have got what we have all been waiting for that perfect buying opportunity. Intel trading below $50 for over a week to a BARGAIN, the lower it goes the greater the bargain. So I am prepared to load up the truck with Intel stock, even going so far as to holding a temporary trading position of an extra 1%. So please don't in a few weeks time ask me when Intel will trade back below $50 again, because this stock is on the fast track to tripling and more. Intel at $50 and below is CHEAP! I really should buy more whilst it remains so, my buying level remains at $48.
This analysis is an excerpt from my recent extensive analysis - AI Tech Stocks Portfolio Updated Buying Levels and Zones as Financial Crisis 2.0 Continues Brewing
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The China Syndrome
Stock Market Begins it's Year End Seasonal Santa Rally
Stock Market Trend Forecast Current State
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Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock
INVESTING LESSON - Give your Portfolio Some Breathing Space
How Stagflation Effects Stocks
INTEL Bargain - 15.5% Discount Sale
Why Intel stock price dropped 15%?
FACEBOOK - 10% DIscount
IBM - 20% Discount
Amazon - 5% Discount
APPLE 4% Discount
AMD $136 on Route to $200
TSMC - $117
Microsoft $336
Google $2980, PE 28.7, EC 30.
Nvidia Leaves planet Earth - $299, PE of 106
Heads Up on NEW Potential Tech Stocks
AI Stocks Portfolio Updated Buying Levels
AI Stocks Buying Plan B
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Nadeem Walayat has over 35 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
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