Intel The New Must-Own Stock For The Next Decade
March 15, 2017 3:38pm
Intel Corporation (Nasdaq: INTC) has long been one of the top two or three must-own stocks among blue chip tech companies. It has been part of the Dow Jones Industrial Average since 1999. So successful has Intel been as a company that if you had bought $1,000 worth of shares back in 1980 when the stock first began trading, today you would have close to $1.2M including dividends. That is M for "million"...yes, indeed. It is a beauty of a stock for the buy-and-hold investor. The stock has made many mom and pop investors millionaires. I'm convinced that it is on the verge of doing it again over the next ten years.
Intel is most known for its PC chips. They are fast, reliable, and a well established facet of the computer industry. For some time the "death of the PC" was being called for as the focus shifted from desktops to hand-helds, but it turned out to be unfounded. Today, the computer industry is exploding as semiconductors are found in so many new tech products -- smart phones, smart TVs, smart homes, utility grids, smart cars, etc. -- and in the ballooning Internt of Things connectivity space. Intel has competitors here (QCOM, NVDA, AVGO) but Intel dwarfs them all in terms of market cap and market breadth. Now with Intel involved in cloud computing, security software, flash memory and other applications, its brand value has only grown as the competition has heated up.
But this week, Intel took its company in a direction few saw coming. On Monday, Intel announced it was buying the world leader in building the tech that is required to make cars not only smart, and smarter, but also completely self-driving. Mobileye (Nasdaq: MBLY) is another of our long-term holds (we brought the stock to our IXTHYSLetter.com subscribers 2 years ago) and now it is owned by Intel, the world leader in building the chips that drive the things Mobileye makes. It is a match made in heaven.
Some criticized the deal for being too expensive. But in fact, Mobileye is valued by the very conservative Morningstar (Nasdaq: MORN) at nearly $65/share, which is more than what Intel paid for the stock. No one can doubt that the "self-driving car" change-wave will be one of the biggest advances in tech over the next decade. Congloms like Alphabet (Nasdaq: GOOG) and Apple (Nasdaq: AAPL), and chipmakers like Nvidia (Nasdaq: NVDA) and Qualcomm (Nasdaq: QCOM) are clamoring to get on board. But with this purchase, Intel has just declared itself the dominant player in what may be the dominant trend in tech over the next ten years.
The market and a few analysts did not initially like the deal. But that is a very short-sided view. Intel has been lowering its dividend in recent months -- also not liked by investors -- but now we can see the wisdom there as it was saving cash for this purchase. Mobileye has contracts with 27 car makers, including a new contract with BMW...which is huge. As Jim Cramer said, this deal with Mobileye "puts Intel back in the driver's seat."
Intel CEO Brian Krranich predicts that the "automous car market" will be bigger than the PC market. On a dollar for dollar basis, this is certainly true. US citizens have 2.3 cars in every driveway but 3 computers inside the house. But the car on average costs 20x what the PC costs, and you know the internal components required to drive all that data to make split-second driving decisions -- and Intel is primarily a "data" company known for its processing speed -- are going to be much more expensive in the car vs. the PC.
Driverless cars are the next big revolution in tech. Intel has just put itself in the pole position ahead of this move. It is time to get on board, buy and hold for the next decade.
I have a six year old son named Nathan, pictured above. I personally question whether he will even need a driver's license when he turns 16 in a decade. A pilot's license, perhaps...but there is a good chance he may never drive a car in his lifetime. So today, I bought a modest amount of Intel shares and plan to hold them in his College fund. I fully expect his tuition will be paid for and then some by the time he turns 18.
Best regards, TC
PS: if you want to give the IXTHYS Letter a try, shoot me an email and I'll send you a 50% off coupon.- - -
Dr. Thomas K. Carr (aka "Dr. Stoxx")
Founder, CEO of DrStoxx.com and IXTHYSLetter.com