Sell Intel (INTC)

05/06/2011 1:30 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Lot’s of rumors and news floating through the market on Intel (INTC). I don’t think most of it has any real import for investors. It’s certainly irrelevant to anyone who bought shares of Intel for their high dividend way back last fall when I added it to my Dividend Income portfolio.

Then the shares traded at $18.87 and yielded a high (especially for a technology stock) 3.4%. Today, May 6, the stock trades at $23.52 and yields just 2.89%.

That’s a hefty 24.6% gain since September 17. But because of that gain the yield is no longer high enough to make the cut for my Dividend Income portfolio and I’m dropping it from that list with today’s revision of that portfolio (http://jubakam.com/2011/05/when-markets-get-bumpy-thoughts-turn-to-dividends-of-course-you-should-be-thinking-about-dividends-all-the-time-my-dividend-income-portfolio-is-a-good-place-to-start/ )

The recent buzz is a result of Intel’s announcement of a new 3D chip technology. No, this isn’t a new design to produce 3D effects on TVs or whatever. It’s a way to get more processing power on a smaller chip by growing the chip’s transistors into the third dimension, that is, up.

Competitors are willing to concede that Intel’s design will run faster than current 2D chips, but they’re not giving any ground on efficiency. Intel has been unable to gain much ground in the mobile device market because other chips from other manufacturers use less power than Intel’s chips do. That’s important when the device in question is a mobile phone instead of a desktop PC.

Intel clearly hopes that its new design will enable it to crack this market. (Intel thinks that its 3D design will match current speeds while using just half the power.) Rivals such as ARM Holdings clearly hope that it won’t. Maybe the most nuanced view comes from contract chip manufacturer Taiwan Semiconductor Manufacturing (TSM), which manufactures chips for Intel and its competitors. The company has said that it doesn’t see Intel’s current 3D, 22 nanometer designs (a step down in size and up in manufacturing difficulty from the current bleeding edge 32 nanometer technology) giving device makers enough of an edge so that they’ll move from the technology they’ve already designed into their products to a new and relatively untested one. Taiwan Semiconductor’s view is that it will take a generation—a new 14-nanometer chip—before Intel can make significant in roads.

Now remember that this is as chip generation, I’m talking about. Not a human generation of 20 years but more like two or three.

Still far enough in the future so that it’s not going to move the stock price much.

If you’re a dividend investor, time to move on to higher yields. If you’re a growth investor, I’d revisit Intel in the fall or later.

 

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Taiwan Semiconductor Manufacturing as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

 

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