Intel Corporation (INTC) needs no introduction, being the world's largest chip maker. But it seems like the summer swoon spares no one, knocking even the best of stocks down. This however presents the long term investors with great buying opportunities. This article presents 4 reasons why Intel deserves your attention right now.
Recent Sell-off: The stock has fallen from a high of $29.27 on May 3, 2012 to Thursday's closing price of $25.84. That represents a 12% decline, which is quite high compared to the 7% decline in the Dow Jones Industrial Average (DJI). Did something fundamentally change about the company? No. Were there some terrible news from/about the company? Not really. Except for a downgrade/sell rating from Morgan Stanley (MS). Yes, the same Facebook (FB) fame Morgan Stanley.
Dividend: Intel is one of those rare dividend growth tech stocks you can find in the market. The average dividend increase over the past few years has been about 12%. This article extrapolates the dividend growth return on Intel over a 10 year period. Intel's management has proven to be much more share holder friendly than other tech giants like Microsoft (MSFT), with careful use of the company's cash and higher payouts.
Trading Range: Though this might sound to be more of a short term trader's reason than an investor's reason, hear it out. Intel was stuck in the $20 to $25 range for a long time until the recent breakout to $29. This breakout is bullish overall and Intel is right now almost at the middle of its recent trading range, which provides a nice entry point. You know the stock has had a floor level for years on and you also know it recently broke out of its trading range onto the higher side. Getting in at the middle of the trading range and averaging on its way down seems like a winning long term strategy for this company, which is not expected to go away any time soon.
Valuation: Valuation matters to investors. Plain and simple. The trend in the market these days seems to be dishing out the lowest possible industry valuation to the best of the breed. Apple (AAPL), anyone? Intel seems to be no different as it has the lowest current and forward PE of all its peers like Broadcom (BRCM) and Qualcomm (QCOM). Yes, QCOM is expected to have higher growth rate but one cannot rule out Intel from dominating the mobile space as well. For example, Intel's PE of 10 is less than half of Broadcom's.
Conclusion: So, there you have the 4 reasons why we believe "Intel Inside" your portfolio may help you "Leap Ahead" of the others. Since this is a company that should be around for a long time and is also one that pays increasing dividends, it will not be a bad idea to start buying here and accumulate on the way down, while waiting for the inevitable ride back up.
Disclosure: I am long AAPL.
Additional disclosure: May initiate long position in Intc at $25.
