Category Archives: intc

Reader Q &A on Intel

Q: “Can I see an updated version of the undervalued and overvalued ranges since 2008 please?”

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Intel Price Momentum Indicator

Below are the short and long term looks at Intel’s Price Momentum Indicator.

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Intel Upside Resistance Targets $INTC

Below are the Upside Resistance Lines for Intel Corp. (INTC) based on the work of Edson Gould: Continue reading

Intel Corp. Price Momentum Indicator $INTC

Below is the Intel Corp. from 1982 to 2023 applying the Price Momentum Indicator.

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Intel Corp. Price Momentum $INTC

Below is a chart of Intel Corp. (INTC) from 2001 to 2022, reflecting Price Momentum data.

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YoY: Intel Corp.

Below is a chart of Intel Corp. (INTC) from 1981 to 2020 reflecting the year-over-year (YoY) percentage change.

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Intel 10-Year Targets

Below are the valuation targets for Intel (INTC) for the next 10 years. Continue reading

Intel 10-Year Targets

Below are the valuation targets for Intel (INTC) for the next 10 years. Continue reading

Netflix: Investors Applaud Inefficient and Disorderly Market

The “Setup”

On October 17, 2016, in after hours trading, Netflix (NFLX) stock increased by as much as +19% on news that the company “…beat analyst expectations…”  More than a dozen analysts raised their price targets on the stock based on the upbeat news.  In one odd case, an analyst who issued a “sell” rating on Netflix also increased the price target, presumably being right about the price increase AND the forthcoming decline (always right, these guys).

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Underneath all the excitement, Barron’s cited Citigroup’s Mark May and Kenneth Dorell as saying the results were actually “better than feared” as it was highlighted that:

“Following a disappointing 2Q report (including 3Q guidance below forecasts), Netflix reported 3Q16 results and issued 4Q16 guidance above these lowered expectations. While subscriber net adds remain below year-ago levels and cash burn (including content spend) remains high, revenue growth accelerated to 32% (vs. 28% in 2Q) on subscriber growth of 25% (vs. 27% in 2Q) as the recent price increases benefited growth. We believe the stock’s reaction in the aftermarket may be due to a combination of 1) the set-up and negative sentiment heading into the quarter; and, 2) investors rewarding Netflix’s pricing power, as price increases proved not to have an outsized impact on churn.”

That’s a lot of negatives to reward a company with an increase in the stock price by nearly +20%.

The Problem

There is more to this picture than the apparent good news reported after-hours on October 17, 2016.  Regulators, exchanges, institutions and investors are sitting by idly while the credibility of the markets is slowly eroded.  I know you’re thinking, “who said the markets had any credibility”.  While there is always a question of integrity of the financial markets in general, active participants should question the rhyme and reason for after-hours market activity.  Chief among those questions should be, “is it still considered an orderly market if statically insignificant volume can garner outsized gains?”

For example, in the three months prior to October 17, 2016, average daily trading volume for Netflix was 10,204,329.  In the period from the close in regular trading on October 17, 2016 to the open of regular trading on October 18, 2016, the after hours and pre-market trading volume for Netflix equaled 10,138,767.  Additionally, the change in the stock price was +17.97% from the close on the 17th to the open on the 18th.  Finally, the total trading volume on October 18, 2016, excluding the pre-market trading, was 39,968,284 while the actual price change in Netflix stock during regular hours was +1.85%.

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So the question remains, is it considered an orderly market when after-hours trading volume does not exceed average daily volume for the last three months but that same volume affects the price so disproportionately? Are investors negatively affected when trading volume is four times the three month average daily volume but the stock only trades up +1.85%?  The answer to both questions is no and yes, respectively.

Orderly markets cannot exist when stock exchanges open in after-hours to some investors (those playing the news release in after-hours) and is effectively closed to those who attempt to live outside of the gyrations of the market.  What everyone hears is the good news about the stock price going up.  However, what is not acknowledged is that short-sellers and good-til-cancel [GTC] orders to buy at a specific price were punished.

The Consequence 

Institutional short-sellers (and individuals) with large holdings were hit hard by being squeezed out of the market at any available price while individual investors who had an order to buy at a set price, say at or above $106 (a technical confirmation of the rising trend), had their orders executed at the opening price of $116 and above, shaving off nearly 10% that could have been realized if the stock replicated the same moves as what the after-hours generated.  However, this would have been unlikely as trading volume on the 18th would have only moved the price from the October 17, 2016 closing price of $98.77 to $100.59.

Many non-market participants and long-only investors would say, “if short sellers are hurt then that is their fault for playing a risky game.”  This seems reasonable until those same investors are on the receiving end of watching their stock get decimated to the downside in the same after-hour market when an otherwise highly liquid stock “gaps down”-5%, –10% or –20%.  This was the case with Intel (INTC) on after-hour trading which saw the stock drop more than -5%, on the same low volume that afflicted NFLX the previous after-hour session.

Financial markets have come a long way since the Nipper Panic of 1901 when short sellers in Union Pacific Railroad were squeezed out of the stock as the price increased from as low a $160 up to $1,000 and closed at $325 all in a single trading day.  However, when investors, regulators, institutions and exchanges ignore glaring issues such as the impact of after-hour trading, we begin to revert to the market we have attempted to avoid.

A Simple Solution

What is the answer to this problem?  Either companies are required to release news during regular trading hours or after-hour activity should be eliminated.  The best option is keep the after-hour trading and require all market relevant news to be done at the middle of each trading day.  This would promote a more orderly and efficient market without the chaos.

Alternatively, a steep price will be paid (by even those who are not participants) for ignoring a basic issue of market credibility, further undermining an already damaged reputation.

Chip Sector Cycle Says Sell

On December 6, 2012, we said the following of our Nasdaq 100 Watch List:

“We’ve highlighted the chip sector stocks to put emphasis on the fact that, as an industry group, the sector may be at or near a low.”

After a year and a half, the chip sector stocks have achieved all that we had anticipated when we wrote about them in late December 2012.  As seen in the chart below, all of the stocks except Altera (ALTR) achieved gains that beat the Nasdaq Composite growth of +46.22% in the same period.

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The chip sector does run on a cycle and it is our belief that while this may not be the top it is time to sell the principal in those stocks that have had a decent run.  The profit portion should be allowed to compound until new relative lows are achieved. 

We’ve been fortunate to successfully identify two chip sector cycles lows on March 20, 2010 and December 6, 2012.  As we have in the past, we will notify subscribers of investment opportunities at the next cycle low.  Investors may want to consider rotating into sectors that we’ve identified as worth accumulating using the proceeds from the sell of chip sector stocks.

A Tale of Two Stocks: Dell v. Intel

On November 2, 2012, our valued subscriber S.D. asked us about our thoughts on Dell, being the second stock on our Nasdaq 100 Watch List.  We said the following (found here):

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Nasdaq 100 Watch List: October 5, 2012

Below are the Nasdaq 100 companies that are within 10% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Symbol Name Price P/E EPS Yield P/B % from low
INTC Intel Corporation 22.68 9.63 2.36 4 2.31 1.84%
EXPD Expeditors International of Washington 35.55 21.16 1.68 1.6 3.65 2.07%
ATVI Activision Blizzard 11.3 16.1 0.7 1.6 1.2 2.91%
DELL Dell Inc. 9.66 5.75 1.68 3.4 1.68 3.32%
MRVL Marvell Technology Group 9.25 11.84 0.78 2.6 1.09 3.35%
LRCX Lam Research Corporation 32.26 23.9 1.35 0 1.16 3.50%
WCRX Warner Chilcott plc 13.3 11.67 1.14 0 15.18 5.35%
CHKP Check Point Software Technologies 46.72 16.86 2.77 0 2.92 8.20%
BBBY Bed Bath & Beyond Inc. 61.6 14.31 4.3 0 3.57 8.60%
TEVA Teva Pharmaceutical Industries 40.12 11.27 3.56 2.1 1.55 8.79%
MCHP Microchip Technology Inc. 33.25 21.47 1.55 4.2 3.18 9.99%

Watch List Summary

As we’ve indicated in our most recent Transaction Alert, we bought Intel (INTC).  Below is the Altimeter for Intel since 2006.

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According to the Altimeter, Intel at it’s worst, a la the 2009 low, has a downside target of $19.35. It is very important to consider the 2009 low because according to Charles H. Dow:

…the very foundation of investments in industrials should be knowledge of what these companies earned, say in 1893 to 1896, making, perhaps, reasonable allowances for economies under consolidation [1].”

It is important to note that the period of 1893 to 1896 had declines in the market as much as -40%. What is useful about Dow’s view on earnings is that they should be judged in comparison to the prior bear market lows for the company in question. In the instance of a company that experienced a low in earnings in a bear market or during a recessionary period, essentially Dow is advocating the use of the worst-case scenario.

According to Value Line Investment Survey, 2009 was the most recent low in earnings and reasonably reflects where we should expect the price of Intel to revert to under a worse case scenario.  Although Intel fell as low as $12 a share in 2009, provided the company can afford to continue dividend increases, we believe additional purchases should take place at $16.

To reiterate, the fundamental reason for our purchase of Intel are as follows:

  • Trading at 9x earnings
  • At $22.47, the stock is within 3% of the one year low
  • The stock has a 4% dividend yield, the ex-dividend date is approximately November 2, 2012
  • INTC has increased the dividend steadily since 1992, the annual rate of increase has averaged 31% since 2003
  • Trading at 5.7x cash flow; Value Line indicates that fair value is at 10x cash flow, nearly double the current price

Another stock to watch for is Microchip Technology (MCHP).  This Altimeter for the stock is below:

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In the chart are the upside and downside levels to look out for.  As an example, the next upside target is $35.80 while the next downside target is $30.54.

Of particular interest about MCHP is the fact that it appeared on our March 20, 2010 watch list as having the highest yield in the Nasdaq 100 index.  That high relative yield translated into a +35% gain one year later for a total return of +39.80%.  As a way to manage risk, we may later buy Microchip Technology (MCHP) instead of Intel for our second 15% purchase for our portfolio.

Watch List Performance Review

In our ongoing review of the Nasdaq 100 Watch List, we have taken the top five stocks on our list from our October 7, 2011 list and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 10/7/2011 10/5/2012 % change
Illumina, Inc. 27.18 51.79 90.54%
QGEN Qiagen N.V. 12.65 19.2 51.78%
BMC BMC Software, Inc. 36.98 43.34 17.20%
LIFE Life Technologies Corp. 36.82 50.29 36.58%
TEVA Teva Pharmaceutical 36.75 40.12 9.17%
Average gain: 41.06%
NDX Nasdaq 100 2202.76 2811.94 27.66%

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As reflected in the chart and table above, the top five stocks on our list achieved substantial gains on the average.  Only Teva Pharmaceuticals (TEVA) was unable to keep up the pace.  Six months after the watch list, all of the stocks were able to achieve our minimum annual gain of +10%.

Citation:

  1. George W. Bishop Jr., Charles H. Dow: Economist, Dow-Jones & Company (Princeton, 1967), page 11.

Transaction Alert: Bought Intel (INTC) at $22.84

  • We have taken a 15% position in Intel (INTC) at the average price of $22.84.  We expect to add to this position as the price declines to the $16 level.

Intel (INTC) is being purchased for the following reasons:

  • Trading at 9x earnings
  • At $22.47, the stock is within 3% of the one year low
  • The stock has a 4% dividend yield, the ex-dividend date is approximately November 2, 2012
  • INTC has increased the dividend steadily since 1992, the annual rate of increase has averaged 31% since 2003
  • Trading at 5.7x cash flow; Value Line indicates that fair value is at 10x cash flow, nearly double the current price

Nasdaq 100 Watch List

Watch List Summary
At the end of the week for October 15, 2010, the top performing stocks from our Nasdaq 100 list for September 17, 2010 are Seagate (STX) with a gain of 38.98%, Logitech (LOGI) with a gain of 25.15% and Google (GOOG) with a gain of 22.71%.  Gains of 10% or more in a month may require mental trailing stops or selling in our estimation.  The trajectory of the top performing stocks in this category cannot continue at the same rate for too long; expect reversion to the mean.
The worst performing stock from our September 15th watch list are Urban Outfitters (URBN) down –9.12%, FLIR Systems (FLIR) down –5.32% and Steel Dynamics (STLD) down –4.40%. The average gain for the Watch List was 6.67%. In the 1-month period from September 17th to October 15th, 86% of the stocks were up while 14% of the stocks were down.
The average gain for stocks that were up was 8.45% while the average loss for stocks that fell was –3.76%. Among the top ten performing stocks the average gain was 17.94%.
From prior observations, FLIR Systems (FLIR) and Adobe Systems (ADBE) should be examined carefully as potential investment opportunities.  It is our expectation that Apollo Group will be among the companies that will be rotated out of the Nasdaq 100 index in the coming new year.
Nasdaq 100 Watch List
Below are the Nasdaq 100 companies that are within 11% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.
Symbol Name Trade P/E EPS Yield P/B % from Low
APOL Apollo Group, Inc. 36.58 9.37 3.9 0 4.05 2.29%
URBN Urban Outfitters, Inc. 31 20.17 1.54 0 3.83 3.06%
FLIR FLIR Systems, Inc. 25.79 17.53 1.47 0 3.05 7.46%
INTC Intel Corporation 19.32 11.56 1.67 3.30% 2.35 9.77%
ADBE Adobe Systems 28.08 31.34 0.9 0 2.77 10.33%

Watch List Performance Review
The following is a total return (appreciation plus dividends) performance review of our Nasdaq 100 Watch List from October 15, 2009:
  • Stericycle (SRCL) up 37.95%
  • Genzyme (GENZ) up 28.93%
  • Cephalon (CEPH) up 14.33%
  • Gilead (GILD) down -19.09%
As a group, the average gain for the stocks mentioned was 15.53%. This is contrasted by the Nasdaq 100 gain of 19.64% in the same period of time. It is our expectation that only 1/3 of the companies that are part of our list will outperform the market over a one year period. However, when the market of 5,000 investment opportunities is winnowed down to what we believe are the best 50, we think that selecting one out of four companies become so much easier.
Please revisit New Low Observer for edits and revisions to this post. Email us.

Nasdaq 100 Watch List

Watch List Summary

At the end of the week for September 17, 2010, the top performing stocks from our Nasdaq 100 list for August 15, 2010 are Oracle (ORCL) with a gain of 21.27%, Qualcomm (QCOM) with a gain of 12.07% and Computer Associates (CA) with a gain of 11.57%.
The worst performing stocks from our August 15th watch list are Intel (INTC) down –1.78%, Applied Materials (AMAT) down –1.34% and Activision (ATVI) down –0.46%.
The average gain for the watch list was 6.33%. Of the two stocks that we pointed out as being standouts from August 15th, Garmin (GRMN) exceeded the average return by climbing 9.57% while Paychex (PAYX) underperformed the average gain by rising 3.92%.
A distinction that needs to be made between this week’s list and our August 15th list is that we’ve ranking the companies on this list by those stocks nearest their 52-week low. Our previous list was ranked by those stocks that had the highest dividend yield and within 20% of their respective 52-week low.

Performance Review

The following is a total return (appreciation plus dividends) performance review of our Nasdaq 100 Watch List from September 11, 2009:
  • Stericycle (SRCL) up 44.48%
  • Genzyme (GENZ) up 25.54%
  • Pharmaceutical Product Development (PPDI) up 20%
  • Cephalon (CEPH) up 5.92%
As a group, the average gain for the stocks mentioned was 23.99%. This is contrasted by the Nasdaq 100 gain of 16.07% in the same period of time.

*chart does not reflect dividend reinvestment for PPDI


Nasdaq 100 Watch List

Below are the Nasdaq 100 companies that are within 20% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Symbol Name Price P/E EPS Yield P/B % from Low
PAYX Paychex, Inc. 25.95 19.67 1.32 4.80% 6.67 5.27%
INTC Intel Corporation 18.81 11.26 1.67 3.40% 2.3 6.87%
AMAT Applied Materials, Inc. 11.02 24.44 0.45 2.50% 2.03 7.33%
YHOO Yahoo! Inc. 13.89 22.77 0.61 N/A 1.59 7.34%
MXIM Maxim Integrated Products, Inc. 16.91 41.86 0.4 5.00% 2.15 7.91%
GILD Gilead Sciences, Inc. 34.56 10.47 3.3 N/A 4.58 8.93%
ATVI Activision Blizzard, Inc 10.82 41.94 0.26 1.30% 1.21 8.96%
DELL Dell Inc. 12.45 15.74 0.79 N/A 3.92 9.80%
RIMM Research In Motion Limited 46.72 10.24 4.56 N/A 3.2 9.85%
AMGN Amgen Inc. 55.22 11.73 4.71 N/A 2.28 9.87%
DISH DISH Network Corporation 18.77 11.26 1.67 N/A N/A 10.02%
CSCO Cisco Systems, Inc. 21.86 16.46 1.33 N/A 2.82 10.31%
XRAY DENTSPLY International Inc. 30.66 16.55 1.85 0.70% 2.6 10.45%
MSFT Microsoft Corporation 25.22 12 2.1 2.10% 4.76 10.95%
SPLS Staples, Inc. 19.49 17.26 1.13 1.80% 2.2 11.69%
PDCO Patterson Companies Inc. 27.15 14.67 1.85 1.50% 2.3 12.52%
SHLD Sears Holdings Corporation 66.83 27.38 2.44 N/A 0.9 12.87%
GOOG Google Inc. 490.15 21.29 23.03 N/A 3.77 13.03%
LIFE Life Technologies Corporation 46.51 29.91 1.56 N/A 1.97 13.16%
STX Seagate Technology. 11.16 3.55 3.14 N/A 1.95 13.41%
FLIR FLIR Systems, Inc. 27.24 18.52 1.47 N/A 3.25 13.50%
GRMN Garmin Ltd. 29.64 8.95 3.31 5.10% 2.21 13.52%
TEVA Teva Pharmaceutical Industries 53.48 19 2.82 1.20% 2.48 13.81%
FLEX Flextronics International Ltd. 5.55 15.72 0.35 N/A 2.26 14.20%
COST Costco Wholesale Corporation 61.29 21.93 2.8 1.30% 2.43 14.75%
HSIC Henry Schein, Inc. 56.35 15.82 3.56 N/A 2.31 14.77%
CERN Cerner Corporation 79.18 31.31 2.53 N/A 3.83 14.85%
CELG Celgene Corporation 55.25 29.99 1.84 N/A 5.11 15.06%
CA CA Inc. 20.44 13.43 1.52 0.80% 2.02 15.48%
ERTS Electronic Arts Inc. 16.26 N/A -1.06 N/A 1.96 15.63%
VRTX Vertex Pharmaceuticals Incorpor 36.25 N/A -3.53 N/A 9.01 16.00%
KLAC KLA-Tencor Corporation 31.05 25.31 1.23 3.30% 2.32 16.34%
STLD Steel Dynamics, Inc. 15.01 15.73 0.95 2.00% 1.58 16.45%
WCRX Warner Chilcott plc 22.75 11.2 2.03 N/A 2.82 16.55%
LOGI Logitech International S.A. 15.39 22.57 0.68 N/A 2.68 16.86%
CEPH Cephalon, Inc. 62.26 12.48 4.99 N/A 2.09 17.36%
URBN Urban Outfitters, Inc. 34.11 22.19 1.54 N/A 4.26 18.85%
FWLT Foster Wheeler AG. 24.19 10.8 2.24 N/A 3.46 18.99%
FISV Fiserv, Inc. 53.56 17.16 3.12 N/A 2.57 19.55%
JBHT J.B. Hunt Transport Services, I 35.26 26.73 1.32 1.40% 7.56 19.73%
CTAS Cintas Corporation 27.71 19.64 1.41 1.70% 1.67 19.96%