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INTC ready for 50% gain to $30/share by end of 2011

|Includes: Intel Corporation (INTC)

INTC (Intel) is poised to be one of the years biggest winners.  I predict a 50% gain from today's price to achieve fair value.  This is a classic Graham/Buffett opportunity.  A solid business with a huge moat. Good management. Great roadmap.  Striking low valuation.

The ARM scare pushing down the price is overblown.  Technologically it is a non-issue.  INTC will make competing chips that are more powerful and cost effective and that is what hardware makers will use.  INTC also is making SOC (system on a chip) and will compete there very strong. 

Also if you consider more tablets and apps going to the cloud that means that server demand will increase as the processing moves from a laptop/desktop to a server in the cloud.  Who sells high end server chips in the cloud?  Intel does and those are higher margin chips to boot.  The cloud revolution actuall plays well into Intel's business roadmap.  No worries here.

Manufacturing chips and getting good yield requires huge capital investment for fabs and equipment.  Making them in quantity takes expertise and capacity.  Intel has all of this while the smaller competitors trying to ease in here do not.  Any competition will require lots of time and money to get competitive. There is nothing disruptive here.  Also don't forget the  INTC patent portfolio is second to none.

Financially INTC has almost $4/share in cash.  It trades for a paltry 8 times cash flow right here.  I see INTC growing well over 10% this year and raising it's juicy dividend, currently at 3.4%.   The increase is in the cards as the payout ratio is well < 50% not to mention again..the almost $4 cash on the books.  The balance sheet by the way is pristine.

INTC also has seasoned management.  This management has expanded into the fast growing and profitable SSD drive market with partner Micron. This will be some fruit in the coming 10 years.  SSD is the future and the phase in will rapidly increase in the next 2 years and continue on.  Within a couple years you won't even buy a laptop with a spinning drive.  Next high end servers use these SSD's for high output on database and other high I/O applications.

Mr. Market has given us a gift here to load up the truck.  Anything under $25 is a buy with very favorable margin of error.  Under $21 you have a huge margin of error considering, ex-cash, the enterprise is being valued at just $17/share and we will see at least $2 in earnings this year with stronger cash flow yet.

So while INTC the business is actually doing better then it has in its operating history it is trading at almost record low price to sales, price to cash flow, price to earnings and price to book.  Nothing wrong with that as this is how the market gives you opportunity to make money.  These are the pitches you wait for all year.

So get paid the dividend to wait for wall street to wake up. Don't assume the pro's are smart, they are NOT.  That is how I've beaten up the indexes and all the mutual funds and hedge fund managers.  Dont' believe they know more.  They figure it out but only when it is right in front of them and they react, panic and buy.  They will buy the shares from you much higher later this year.   I'm long and adding to my position and will enjoy the 50% plus dividend while I wait.  Remember you get good prices when there is not a cheery consensus.