Intel Is Down - Not Out

Intel is one of the true heavyweights in the semiconductor industry. I own Intel (INTC) in my personal accounts, as well as my subscriber portfolio. I also own Taiwan Semiconductor (TSM) and Tower Semiconductor (TSEM) in both.

I would like to discuss with you why I think Intel is a sleeping giant ready to regain its territory. I will not be comparing AMD’s (AMD) 7nm, 8 core laptop products with Intel’s 10nm, 4 core Ice Lake, or discussing clock speeds and heat signatures and such. You can read this in any of a dozen articles at various sites likely posted the same day you read this.

Nor will I discuss the virtues or shortcomings of silicon versus silicon carbide versus gallium nitride et al. There are hundreds of articles that already reach deep into the weeds to shed light on why company X or company Y has the best chance of owning this space in the short term.

I instead offer a view on the investing merits of Intel. Of course, these are affected by staying on the leading edge of product development, but also by the strength of a firm’s marketing team, their reputation and longevity in delivering top-quality product, their ability to attract and retain top talent, their senior managers, national policies, global politics, and the depth and breadth of their R&D capabilities. These are the company-specific issues I am interested in.

To these I add the valuation metrics for the stock itself. It is easy to get lost in those weeds above, forgetting that we are trying to make great investments here, not out-shout someone about a particular chip or other product.

Yes, Intel stumbled when they announced they were behind schedule on delivering their new 7nm product. Companies announce delays all the time.

Is this a death-knell for Intel? No. Is it a wake-up call? Yes. And if the problem is one of manufacturing capacity rather than significant design flaws, there are other firms Intel can sub-contract to in order to get quickly up to speed.

I almost never buy 100% of my position at once. I am happy with a relatively small 350 shares for now. If it goes down and the metrics I use to analyze a company remain the same or improve, I will buy more in additional tranches. If it goes up, I do not marry any stock. As it rises, I will place trailing stops.

MANAGEMENT AND WORKFORCE

This seems to be a very big concern for many. The big knock against Intel’s CEO, Bob Swan, is that he is a “finance guy,” having been promoted from the Intel CFO position, not an engineer. The question seems to be, “How can he run a semiconductor company when he doesn’t understand the intricacies of the physics and engineering characteristics of the product?”

My answer is simple. I do not know Mr. Swan, who may or may not be a skilled CEO, but I know that there are hundreds of other executives who are fine leaders, keen judges of talent and excellent delegators.

Warren Buffett was never a railroad executive, bricklayer, candy-maker, or fast-food executive. Yet Berkshire Hathaway’s 100%-owned Burlington Northern, Acme Brick, See’s Candies, and International Dairy Queen seem to be doing just fine.

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Disclosure: I am/we are long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company ...

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