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Author: rationalwalk Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 213752  
Subject: OT: Intel Date: 10/11/2012 10:02 AM
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Berkshire's brief ownership of Intel and apparently well timed exit along with Intel's recent appearance on the 52 week low list prompted a brief look at Value Line. I know that there has been some discussion of Intel here in the past so I thought I would post a few observations.

First, it seems clear that the stock is quite cheap based on trailing earnings as well as "consensus" estimates and the company now yields in excess of 4%. However, much of the improvement in results seems to be due to margin expansion - with operating margin increasing from a recession low of 29.8% in 2009 to 42.4% in 2011. Margins were somewhat higher in 2003 and 2004 but the company seems to be approaching peak margins from past cycles. The valuation may indicate that the market agrees, but some analysts, such as Value Line, forecast continuing expansion in operating margins to 50% by 2015-2017 along with net margin of 24.5% ... which seems on the aggressive side.

The average operating margin based on value line's data over the past ten years is 38.7% and average net margin is 18.6% over the same timeframe. If we take Value Line's 2015-17 sales estimate of $70 billion at a midpoint of 2016 and apply the average net margin of 18.6%, we would get $13 billion of net income, or around $2.60 per share. Value Line's estimate is $3.40 per share due to the more aggressive margin assumptions. If we use their 12x P/E but against the more conservative $2.60 EPS, that gets to ~$31/share by around 2016 ... four years from now, plus shareholders should collect between $3.50-$4.00 in dividends over that timeframe. That's about a 60% total return or 12.5% annualized over the next four years using what appears to be "normalized" margins BUT also using Value Line's $70 billion sales forecast which I'm not sure is realistic.

At first glance, Intel looks like it warrants further work even using "normalized" margins assuming that sales growth expectations hold up. I guess that's the main concern facing the company right now given the issues surrounding the PC market ... If sales are $50 billion in 2016 rather than $70 billion and "normalized" margins prevail, EPS would be around $1.85/share ... and probably would not be assigned a P/E of much more than 10. That would imply near zero returns on the stock from today's price over the next four years.

So I think the company warrants further work after a first glance ... It would be quite interesting to hear Combs or Weschler's thoughts on buying and selling Intel. Perhaps they would be willing to talk about it since Berkshire no longer owns the stock. It would be great if Buffett makes Combs and Weschler available at the next shareholder meeting to answer questions from the audience but I doubt that will happen.
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Author: eurotrash01 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194819 of 213752
Subject: Re: OT: Intel Date: 10/11/2012 11:01 AM
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Bond proxy. Bought some around $22.50 for my mom's dividend-heavy account to be forgotten by me for a while as I believe the stock will trade poorly for the rest of the year on industry news & tax loss selling. Hedge funds won't add it on balance as INTC represents the opposite of their heavy bets. INTC's lunch is being eaten by the winners in their portfolios.

et

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Author: Technodweeb Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194820 of 213752
Subject: Re: OT: Intel Date: 10/11/2012 11:37 AM
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My wife bought some in the low $22s the other day, right before Mr. Genius banker analyst downgraded. I would LOVE TO HAVE A JOB LIKE THAT. I see a stock go down 30% and say, "I officially downgrade this stock", and get paid to do it!! Just think how people would feel about my innate stock analyzing ability.

And that is why I have so much of my money, and practically 100% of my money with team Warren Buffett, at least for now. They see things that I don't see, and they are usually right on the money.

BTW - Anyone see KahunaCFA? I seem to remember some comments about Berkshire selling Intel in the high 20s, and cycles. Hmmm.

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Author: ghu216 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194822 of 213752
Subject: Re: OT: Intel Date: 10/11/2012 2:34 PM
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My wife bought some in the low $22s the other day … … … 

my wife bought in the mid $22s. If you had listened to Mr. Analyst you would have made a mistake, but as it is you bought at a very low price and with a dividend yield of over 4&.

G H U

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Author: ghu216 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194902 of 213752
Subject: Re: OT: Intel Date: 10/17/2012 10:31 AM
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did exactly the same as you on Intel. Can I prevail on you to let me know when you "remember" it again?

With unrequite4 love,

G H U

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Author: ghu216 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194904 of 213752
Subject: Re: OT: Intel Date: 10/17/2012 10:37 AM
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They see things that I don't see and …  … … 

Like what is coming down the pike.

G H I

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Author: karensie Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194907 of 213752
Subject: Re: OT: Intel Date: 10/17/2012 12:25 PM
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Two favorites get haircuts.

"IBM, Intel results weigh down tech stocks"

http://www.marketwatch.com/story/ibm-intel-results-weigh-dow...

Tim

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