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Is Now The Right Time To Buy Intel?

Nov. 01, 2017 6:20 PM ETIntel Corporation (INTC)57 Comments


  • The Power Factors System is a quantitative stock-picking system that has produced impressive backtested returns over the years.
  • The most recent update to the Power Factors Portfolio recommends a long position in Intel.
  • Intel stock is significantly undervalued in comparison to peers, the company generates superior profitability, and momentum is quite encouraging.

The Power Factors System is the main building block in my research service, The Data Driven Investor. This quantitative model basically ranks companies in a particular universe according to a combination of factors: financial quality, valuation, and momentum.

Some brief explanations about these factors:

Financial quality considers variables such as profit margins on sales and profitability on capital. All else the same, the more profitable the business the higher the returns it can generate for investors over time. We want to invest in companies that make lots of money on every sale and use shareholder capital efficiently to produce profits.

Even the best company can be a mediocre investment if the stock price is unreasonably high, so we want to make sure that we are paying a fair price for the stock. The Power Factors System includes valuation ratios such as price to earnings and price to free cash flows, among several others.

Stock prices don't just move in response to financial performance in isolation. What really has a big impact on returns is performance in comparison to expectations. For this reason, we want companies with strong financial momentum, meaning that the business is performing better than expected and earnings expectations are increasing.

The backtest picks the 50 best-ranking companies in the S&P 500 index and builds an equal-weighted and monthly rebalanced portfolio with those names. The portfolio is assumed to have an annual management cost of 1% to account for trading expenses and similar considerations, and the benchmark is the SPDR S&P 500 Trust ETF (SPY).

Since 1999 the portfolio recommended by the system generated an average annual return of 12.57%, more than double the 5.91% per year produced by the ETF. In cumulative terms, the Power Factors System gained 828.42% vs. 194.49% for the benchmark.

Putting the numbers

This article was written by

Andres Cardenal, CFA profile picture
Andrés Cardenal, CFA. Economist, financial analyst, columnist. Naturally flavored.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (57)

stan11 profile picture
Correction. Make that Tuesday, after X-date.
stan11 profile picture
Not going to be greedy. Plan on selling 1/2 Monday and locking in some good profits.
After 17 years of poor pricing, maybe management has really made valuable changes, allowing deserved pice appreciation?
Barron's today touts INTC ... correct or a contrarian signal?
ULS profile picture
03 Nov. 2017
This so-called "analysis", plus most of the comments I read here, tell me one thing for sure: understanding a company deeply enough, to make a good judgement on its future, is indeed a very difficult undertaking.

All of the comments, which boasted about how lucky you were, are totally worthless. And the discussion about the barber as well. And any of you people, who actually believe you'd be able to pin a reliable FV estimate on any company, are kidding yourselves. A REAL fundamental analysis of a company is much more than the ticking off of some comparative metrics, like the author did it.

Unfortunately SA`s editors are not capable of distinguishing between chaff and wheat either, that's why we get to read so many rotten "analyses" here.
well that was insightful too ULS...try and have a better weekend.
mikefurman profile picture
I have been reading many Seeking Alpha analyses recently and there was almost never any useful insight (let alone good prediction of the results) before the earning. There was never a prediction of a rally. On the other hand, analysts always try to explain what happened (and this is useless).
I love a dip right b4 a drip.
pmheindl profile picture
It is hard to call a top. Buy now and if there is a dip w/o clear fundamental reason buy more and lower the cost basis.
The stock ran up so much since earnings report, I wonder if it ran out of steam.
I bought Intel at 14 $ after the crisis but sold at 25. Re entered in April this year at 36 and continuing to buy another position at 44 $. It's a different Company now. Imo. Intel is easily worth + 200 B. Such a strong report and outlook + a diversification that is relevant and growing. The new Intel memory tech is unique to Intel and MU but a lot of end products for enterprise will benefit Intel more per sold unit, i.e. MU only collects "licence fees" on the high end stuff. A lot of holders are waiting for a dip to buy more Intel stock but that is a destructive behavior. If you "speculate" for Intel to dip ? then why are you holding a key position to begin with ? and if you like the quarter ( and fiscal 2017 + the outlook ) then why will you not buy more stock just because it rallied by 10 % ? What is the big deal and why are so many Intel fanboys on the stingy side ? The company added 20 B to its market cap but the outlook can easily justify another 40 B. Intel is growing and producing excellent net margins. Why should Intel be valued like an IBM ? IBM boasted that it will start growing and yet it hasn't stopped shrinking after something like 21 consecutive reports of negative revenue and massive borrowing just for buybacks and nothing else. IBM is still shrinking. If IBM can trade at p/e 12 ? then Intel can ( imo ) trade at p/e 14 and still be A LOT cheaper. Intel is even cheap at 47 but because I wasn't stingy enough to neglect buying directly after the beat I won't have to add now. Next plan is to wait a year and possibly add more. If it goes above p/s 5 ? I will just hold. So many professors in this forum. I will say it again. Intel is not the same Company in 2017 as it was in 2010 or 2008. Don't look back because I know that you don't have a functioning time machine.
The time to accumulate Intel was over the last decade. I've been a regular buyer on weakness during this period. Same for MSFT.
I purchased at 17 happy days
seems like most people in the comment section don't understand how to value a company. it's expensive now because it went up fast? yeah, like nvda was super expensive after running from 20 to 60 in 5 months... how do you people survive in the market?
Vlad Hristov profile picture
When couple of institution or funds buy, lets say 10% of the float, they can easily juggle the stock between themselves. Remember NVDA was heavily shorted stock and went up that high based on fake dreams and 1 product. At Intel you have reality, which many people as the @author has failed to realize for a long time. Intel has been running the PC boom, The Server boom, and now they will be running the Memory boom, the IoT boom, AI and Automotive boom. Institutions has finally foresee the growth and they are pilling like a monkeys on a banana tree. The good news for us INTC longs is that they need to buy the shares from us the retail investors. INTC is the heavily owned by the people. So fu crooks we gotcha this time.
stockroach profile picture
@Vlad - Welcome back, good to hear from you.
If I were you, I would sell... Buying Intel at this price is risky... You have to wait couple of quarters to determine if the revenue is stable. Otherwise, it just a glitch. I will wait for pull back. I don't see much upside from this point.
stockroach profile picture
@prravin - no upside at this point??? LMAO.. Intel is setting new revenue records for the last 5 quarters and this despite PC market is just stabilizing.
Also the DC group has a lot more to growth. Intel had forecasted double digit growth around 15% but they are only getting 7-8%. BK stated that it is taking longer for customers to ramp and expects better growth going forward. Then you have memory, IOT that are growing and then new markets such as AI and autonomous vehicles and 5G modems.
So it all boils down to PC market. It generates 50+ percent of Intel revenue. PC refresh cycles doesn't happen every year. To me Intel and overall stock market is overpriced.
stockroach profile picture
PC revenue is less & less each quarter. Currently we are at the beginning of a massive Server Upgrade that will also benefit Intel.
Did they get new management last week?
Buy Buy Buy! Going to $50
Bought at 28 few years hold
RiceBowl profile picture
I got pretty lucky, bought in at 35$ just a few weeks ago and it skyrocketed now. Was also thinking about AMD, but I lost a lot of money on them in the past and decided to not trust their investor relations anymore. Intel is a top pick but I wouldn't buy more now. Waiting for a drawback is probably the smarter move, actually, I consider selling it now after I got a 30% increase in my current position and to buy back in after it draws back. The chart looks just too crazy now - but the valuation is still very attractive. It was simply completely undervalued for far too long. Originally, I also went for it due to the great dividend expectations.
New money is entering the mmmarketmarket
time to sell intel intel couldnt face nvidia just cant
RatOnAHat profile picture
Why do you think it couldn't?
Dividend Ambassador profile picture
My goodness, folks only start asking this question once a company has turned things around. I was asking this question in 2010 when everyone hated Intel, for like MSFT, missing smart phones. I saw INTC at that time as a cash machine that wa crazy cheap; had 1000's of great engineers; gobs of cash; a massive and growing dividend; and a great brand and a great history. I bought 1150 shares at various times between 18.80 and 20.19 b/w 2010-2012. I kept the position on dividend reinvest for several years and it grew to 1299 shares. I paid in total about 20K for the position. It passed 60K market value today for the first time. Is now a great time to buy INTC? Maybe, but 2010-2012 was a fantastic time. But it was also a lonely time.
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