We see no reason to alter our view that the attractive valuations of our portfolio holdings will continue to provide handsome returns over our multi-year holding period, explains John Buckingham, editor of The Prudent Speculator.
We discriminate among potential investments primarily by their relative valuation metrics and our assessments of stock-specific risk. We buy only those stocks we find to be undervalued along several lines relative to their own trading history, those of their peers or that of the market in general.
Intel (INTC), a leading global semiconductor manufacturer, supplies advanced technology solutions for the computing industry, including microprocessors, chipsets and motherboards.
Intel shares have soared this year but remain far below historical records. Years of struggling to keep pace with development and manufacturing left Intel in a disadvantaged position compared with competitors like Advanced Micro Devices (AMD) and Nvidia (NVDA).
Efforts to clean house under CEO Pat Gelsinger have started to pay off, though, and the company is projected to return to revenue growth in 2024. Intel is constructing two new semiconductor fabrication sites in Arizona and one in Ohio, with the overall manufacturing buildout expected to cost as much as $100 billion over the next decade.
Fortunately, it’s unlikely INTC will have to foot the whole bill, as Uncle Sam is expected to contribute via the CHIPS and Science Act. It may be a choppy ride for shareholders a bit longer, but we think manufacturing stability and a surge in chipmaker interest related to A.I. will foster continued enthusiasm for Intel.
Pfizer (PFE) is a global pharmaceutical titan that focuses on a variety of innovative therapies and vaccinations. Pfizer has also been in the race to develop an oral diabetes/weight loss treatment to compete with currently approved injectable drugs with rapidly growing popularity produced by two competitors.
PFE shareholders were also recently reminded that Uncle Sam can giveth and taketh away (almost simultaneously), with President Biden saying he would seek new funding from Congress for an updated COVID-19 vaccine as new mutations of the virus reveal themselves, even as the jointly-produced medication Eliquis was selected as one of the first 10 for mandated 2026 Medicare price negotiations.
Push and pull with regulators, governments, competitors and even society will always be present, but we think Pfizer’s foundation is solid, based on strong cash flows derived from a diverse basket of drugs.
We also find the current multiple of 12 times next 12-month EPS and large dividend yield of 4.6% attractive for the scale, portfolio of existing products and drug pipeline with more than 20 therapies in Phase 3 trials.
