Intel – The Best $35 Investment You Can Make Today

Ever since I posted “Beating The Market By %15 In Only 3 Months”, I have been asked what I actually invest in.

Simply stated, I invest in my sphere of competence. I invest in companies that I have a positive personal relationship with and companies that have a promising future.

If you have $35 to invest today and are interested in growing your passive income stream, then you should continue reading.

In this blog post, I will go over the company I consider to be the best investment today, July 23rd, 2017.

Today, Intel Corporation (INTC), priced at $34.73, is my #1 stock pick to hold for the next 5-10 years.

Not only has Intel been around for decades, but Intel is also going to be even more important in the future with the growing trends of computers, data centers, and gaming/e-sports

Let me explain in more detail.

Growth, Value, And Dividend – All In One

Intel Corporation is one of the most promising stocks you can buy in the market today.

Typically, there are 3 reasons to buy a stock. The most common reasons are because of (1) the potential growth of a company, (2) the company may be inherently undervalued, or (3) the company may be a dividend paying champion.

Growth – Growth stocks are typically newer than the other 2 types of stocks. Think of stocks like Twitter (TWTR), Snapchat (SNAP), Netflix (NFLX) or Facebook (FB), where these stocks are desirable because of their huge growth potential. Growth stocks are the types of stocks that can double, triple or even quadruple in a few years. These types of stocks are highly volatile, just take a look at Netflix’s (NFLX) 3-month graph. It looks like a bad roller coaster ride (or a great one, depending on your feelings towards roller coasters).

NFLX 3 month.PNG

Value – Value investing is absolutely my #1 strategy for picking stocks. The goal of value investing is to look for stocks that are generally undervalued by the stock market in the hopes that these companies will come back with a vengeance. Some well-known value stocks are Fitbit (FIT), GoPro (GPRO), and Blackberry (BBRY). These stocks typically belong to companies that the market has fallen out of love with, but are still around today. The reason why I love love love value investing is because of Advanced Micro Devices, or as they’re better known, AMD. AMD had lost the war against Intel, became unpopular with the overall market, and was priced at $2 early 2016. If you bought AMD in January 2016, then you would have an easy %600 gain today with AMD having a stock price of $13.45 today. Personally receiving a %500 gain from AMD in 1 year’s time is the reason why I “value invest”.

amd 5 yr

Dividend – Dividends are payments from a company to the shareholders. Dividend investing is a more traditional way of investing. This style of investing looks for companies that have consistently increased dividend payments for at least 25 years. Popular dividend stocks belong to companies like Johnson & Johnson (JNJ), Coca-Cola (KO) and International Business Machine (IBM). These are all corporate behemoths that have been around since before I was born. These are the type of “blue chip” stocks that are less volatile and have more consistent growth. Just look at the 5-year graph below of Johnson & Johnson. The graph shows consistent growth that is slower but more steady than that of a growth stock.

JNJ 5 yr.PNG

Intel Corporation has all three of these characteristics.

Growth – Intel is the leader in PC processors, owning over %95 of the market share. The lay person probably doesn’t even realize how integrated Intel is within our lives. For instance, if you own a MacBook, an iMac, or any PC in the past decade, then you also have been dealing with Intel components without knowing. The market does not recognize Intel as a stock with growth potential as Intel seems to be a tech giant with “no room to grow”… The market is wrong. Intel products are in our phones, our computers, and our cloud. With the growth of data centers, robots, gaming/e-sports, and the “internet of things” (think home assistance devices like the Echo of Google Home), Intel is going to be increasingly more important in the future.

Value – Intel is currently valued at 13 times earning (or a price/earning ratio of 13). Other competitors, like NVDA and AMD, are valued at a P/E ratio of 54 and -35 (AMD currently has negative earnings), respectively. Intel has been trading flat for the past few years and has not been heavily inflated like the rest of the market. Where other major companies like Amazon (AMZN) and Netflix (NFLX) are trading with P/E ratios of 208 and 188, respectively.

Dividend – Intel is a dividend champion! Not only does Intel have great growth potential and a reasonable price, but they have a %3 dividend yield! That means that you will receive a %3 return based on the current value of your Intel stock holdings. Investing in Intel is a good way to begin building a stream of “passive income”.

Besides all the traditional reasons why Intel is a good stock purchase today, there is one novel reason to buy Intel today – self-driving cars!

Autonomous Vehicles Are Coming!

Unless you have been living in a cave for the past year, you are well aware of the move towards automation of simple tasks.

Specifically, automated self-driving vehicles!

There are many car companies that are all interested in autonomous driving and electric vehicles. Companies like Tesla (TLSA), Baidu (BIDU), Microsoft (MSFT), Fiat Chrysler (FCAU), Uber, and Google/Alphabet/Waymo (GOOG/GOOGL) are all moving towards autonomous vehicles. No one knows which brand will bring the self-driving car to market first (or even which will last).

One thing I do know is that whoever wins the race for self-driving cars will definitely have Intel components in their vehicles. The combination of Intel’s leadership position in chip manufacturing along with Intel’s purchase of Mobileye (MBLY) earlier this year makes Intel Corporation the de facto leader of the hardware/software required to make autonomous vehicles a reality.

Why invest in a specific brand of a car when you can buy the components underlying self-driving cars?

That is the same reason why I would invest in Boeing (BA), which is the #1 performing stock in the Dow Jones Industrial Average (DJIA) this year, over investing in United Airlines (UAL), Delta Airlines (DAL), or American Airlines (AAL). Besides the fact that I like JetBlue (JBLU) more, I would never invest in companies that are easily substitutable. Boeing, on the other hand, is not easily substitutable and is used across all airlines.

Why gamble on which company will get ahead when I can invest in the underlying asset that all companies in the industry require? That is the same logic I am applying to Intel.

Buy Boeing, not the airlines.

Buy Intel, not the car companies.

pcmasterrace.png

The PC Master Race – Rise Of Gaming and E-Sports

When I speak about spheres of competence, I am referring to the specific knowledge and experiences that apply to you.

We all have the one thing that we are really good at. There is one thing that we are more confident, more efficient, and more knowledgeable in than the average person.

That specific task, idea, or field frames our sphere of competence. Some people are medical professionals that know the healthcare industry much deeper than the average investor. Other people may be a beauty guru who are able to tell the difference between a promising product line and products that just won’t sell.

What about me? I am a gamer! Besides putting over 100 hours in the new Zelda game on the Nintendo (NTDOY) Switch, “The Legend of Zelda: Breath of the Wild”, I have spent over 10,000 hours playing video games.

These 10,000 hours have given me the confidence and knowledge I need to call myself a gaming expert.

Malcolm Gladwell – Outliers

Gaming has been an increasingly popular trend among young people. So much so that the viewership for gaming and e-sports is far outpacing that of traditional sports viewership. The pace at which gaming is growing is undeniable and Intel components are at the heart of the gaming trend.

With a %95 market share, Intel is the undisputed leader in PC processors.

With that said, building your own computer has become an internet sensation where gamers will post photos of their “setup” on popular sites like 9gag and Twitter. On these posts, the common phrase people will use is, “rate my setup”. Showing a photo of many monitors, many LED lights, and hardware components you have in your “set-up” has become a popular trend amongst gamers.

Example 1:

setup2

Example 2:

setup12.jpg

Example 3:

fc7a8a34e43dda3f017cba377571c924.jpg

Every time I see a “rate my setup” post, I become ever more confident in the rise of the PC master race. Gaming companies like Take-Two (TTWO), Activision Blizzard (ATVI), Nvidia (NVDA), EA Games (EA), and Nintendo (NTDOY) are all companies that prove that the gaming industry is booming.

Intel Corporation (INTC) is simply the slow turtle in the gaming stampede.

So let’s review:

  1. Intel has growth opportunities at a great price with dividend payments
  2. Intel is going to be  a core component in all thing autonomous, especially the inevitable self-driving revolution
  3. PC sales and gaming sales are trending upward, Intel has yet to see that reflected in its price.

If you have $35 today, then you have a great investing opportunity on your hands.

There are a multitude of valid reasons to invest in Intel.

Whether you agree or disagree with my thesis on Intel Corporation (INTC), it is important to find your sphere of competence and invest within your sphere.

I can’t emphasize enough how important investing is to reaching Financial Independence. Whatever you do, learn how to invest. Invest in yourself, invest in stocks, invest in real estate, or invest in your side hustle!

I don’t care what you invest your money and time in… Just invest!!!

If you are new to the stock market, then start practicing with fake money using my guide on how to start your fake-folio!

Please comments, subscribe, follow, and SHARE if you found this article useful, helpful, or insightful.

-Jack

DISCLOSURES: I am long INTC and currently hold shares of INTC. This article explicitly states my opinion. This article is meant to be supplementary to your own research. DO NOT invest solely based on the information you read here.

Also, I may or may not have any personal interests in other stocks mentioned in this article.

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12 comments

  1. https://p2035.com/2017/04/29/jonson-jonson-and-intel-financial-analysis/

    Did analysis of INTC my self. Yes great company to own and it one of my 4 first investment in us stock. Altough EPS looks a bit flat is past few years. Other as you said very good financials and whats important verh strong balance sheet 🙂 Most great companies went into intense share repurchase decreasing their equity and increasint debts. INTC is one of rare companies with stable growing equity this is what I lime. Equity is the fundatio for the bussines. Yes you can dig out you fundation at good time, but when huracane will strike some great companies might fall.

    Liked by 1 person

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