Intel (INTC)

They made an interesting announcement that they have a new chip coming out that will be not only faster than existing chips, but a quantum faster. He thought chips reached their limit. INTC-Q will no longer be viewed as a commodity manufacturer. They have surpassed their competitors. He expects them to gain increased market share. It has a cheap PE.

He has a model price of $57.88 representing an upside of 60%. Dividend yield of 3%. (Analysts price target is $40.)

Seasonally, technology stocks are a little soft over the summer, and this tends to be the time where they peak out. The chart shows a big lid at around $38. It needs to blow through that in order to be attractive, and at this point it hasn’t happened. Because we are in the worst part of the season for Tech stocks, he would delay on buying this.

This was very, very good when PCs were the main thing. There was a transition to mobile devices and the business turned down. They are about to move to the mobile environment. This is a story that is going through a transition. A solid balance sheet and there is a definite upside opportunity, but he struggles to see how we can gain significantly here. You are at risk of a cyclical decline in the semi market, so he would probably be selling.

The largest chip manufacturer. A good part of their business is declining from traditional PC chips. Their latest acquisition will be positive in the long run. It is a company that makes chips for the autonomous cars. The company uses a good deal of their cash hoard, but they remain in good shape financially and pay a good dividend. He wouldn’t want to bet against this company.

An indispensable company in the world technological echo system. They have chips everywhere. However, it is competing in a very, very competitive industry, in which chips have become commoditized. He prefers some of the broader software/hardware companies such as Apple, Alphabet and Microsoft.

It does not have a long term solid uptrend, so you have to trade this. Typically they are good until the spring. He would get out.

Just acquired Mobileye, which is all about autonomous vehicles. It’s a big gulp, but it is the only way they are going to survive. They can’t sell chips into laptops and standalone computers any more. This is really the direction they want to go. There is lots of competition. He doesn’t want to own this, because free cash flow has been falling. There is nothing wrong with the quality, it’s just way down on his list.

This is in a very awkward situation. They missed the boat on smart phones and those areas. ARM is a company that has done incredibly well. Even Microsoft recently announced that they may be using ARM in some of their products. Thinks this will continue. You are not going to see the growth that they had many, many years ago.

Cisco Systems (CSCO-Q) or Intel (INTC-Q)? Both are old economy tech stocks, and both are excellent companies. If he had to choose, he would choose this one, which has done more to turn the corner.

Earnings keep ratcheting upwards. Also, they have a superb balance sheet. FMV is about 50% higher than what it currently is. High-tech stocks, which were the winners in the Obama market, have been sloping off. He would love to buy this at about $29-$30, which is where you get really, really solid support.

Some parts of technology are cyclical, and others have become ubiquitous, just part of our lives. This is a major chipmaker and looking at the explosion of opportunities for chips, whether in smart cars, computers, etc., many areas of our lives are driven by chips. The difficulty of the producers is commoditization. Basically, they are fighting a trend of lower and lower price trends that have to be offset with new initiatives of bigger and better that no one else has, or on volume. This company spends $12-$15 billion in capital expenditures each year. There are many areas in the Tech space that he would probably gravitate to, before this one.

This has new chips coming out that should do fairly well. They relied too heavily on the PC business in the past, which caused them issues. It also caused their free cash flow to decline. He likes companies that have pricing power where they can raise prices. There are better places to allocate capital.

(Market Call Minute.)

Old tech, largely linked towards the PC. PCs are really declining. A decent company and well-managed, but doesn’t see a lot of growth in it.