Stock of the Day - January 22, 2009 - INTC

Intel Corporation (INTC)

While we’re in the midst of rough times for the economy, we’re also in one of the best times ever to take advantage of bargains in the stock market. Economic instability and investor fear has caused many blue chip stocks (well established companies with little risk) to plummet in value. If you still have faith in American capitalism and the markets, then now is the perfect time for you to scoop up these stocks while the discounted prices are still available. Today’s Stock of the Day is a perfect example of a blue chip company that has been undervalued by the market because of macroeconomic conditions: Intel Corp. (INTC). The near future for the stock will be incredibly shaky, but in the long run I’m confident that the microprocessor developer will rise to the levels it was trading at in the past and possibly even exceed those values.

INTC last traded at $12.82, very near its 52-week low of $12.06. Prior to the economic mess that was 2008, the computer chip developer and producer held steady around the mid-to-low $20s for several years. Intel itself should not be held accountable for the drop in stock price or its decrease in sales for 2008. The company has fallen victim to the constricted wallets of customers as a result of the credit crisis. Intel released its 4^th quarter earnings report today and the numbers were far from attractive. Their 4^th quarter net income for 2007 was $2.27 billion and $234 million in 2008. Intel has recently announced that they will be closing four of their plants worldwide, and the closing will affect 5,000 to 6,000 jobs. CEO Paul Otellini has recently admitted that Intel may even post a loss in the first quarter of 2009.

I don’t put INTC at fault for the dramatic drop because the company rests on a very solid base and has made significant advancements. Intel is sitting on $11.84 billion in cash and has a $71.3 billion market cap. They will be around for a long time to come and they will hold their dominant position in the industry over their main competitor Advanced Micro Devices (AMD). Most importantly, INTC is not stagnant and has not become content with their status. In the middle of their late-2008 fall they introduced their Core i7 Processor. The new chip has been proclaimed by technical analysts to be the fastest and most advanced processor on the planet.

The more I researched Intel’s business moves, the more I grew confident with the way that the company is managed. INTC has not limited itself to only making microprocessors; they’ve created a branch called Intel Capital thats sole purpose is to invest in companies that advance technology. Notable investments are WebMD and Smart Technologies. A recent investment that highlights Intel’s forward thinking is SpectraWatt. The company will produce solar cells and provide them to solar panel manufacturers. It’s well known that Obama will be supporting alternative energy sources, and Intel is capitalizing on this knowledge.

All in all, I see no fundamental problems with the way that Intel is doing business. The company will suffer as the general economy suffers, but when the stock market recovers, INTC’s share price will bounce back to much higher levels. It is for these reasons that I believe INTC is a great long-term investment that can be made with confidence.

 

-Matt Schwartz

College Trillionaire