Seeking Intel's Re-Entry Price

In November, I sold Intel (INTC) at $27 because I thought the upside didn't warrant continued holding and I thought the semiconductor cycle was peaking. Capital equipment spending in semis had already pulled back and a recession was sure to pull down demand for computers. Little did I know then, $27 was close to the peak.

I'm not always that fortunate, but this is my 4th sale of Intel close to its peak ($25 to $35) over the last 7 years, with purchase points ranging from $15 to $19. Intel sold off again Wednesday - down 12% in one day and 27% from my sale point. It turns out that computer sales are not immune to recession after all.

I've followed Intel for most of my career, and their peak to trough cycles are pretty consistent. Underlying topline growth trends are around 3% to 5%, with average EBITDA margins of around 42%. These assumptions haven't changed much in recent years.

Beyond that, Intel is a profit machine, and like most profit machines they tend to fritter a portion of their money away on unprofitable or marginally profitable business ventures. Thus, in my opinion, there is significant underlying value in the business that could be recognized if they would refocus on their core. Thus, I think they are probably worth more than $27 at a peak, but gambling on the unlocking of that hidden value is something I might only do if there is a lack of good alternative investments, which in November was not the case.

I'm watching Intel, as I am other tech stocks. I have a pretty good idea where I think it will represent a compelling buy, and if the investment is more compelling than my existing holdings, I might take a bite.