Dessauer Sees Dow 14,000, Likes Intel

02/16/2007 12:00 am EST


John Dessauer

President, John Dessauer Investments, Inc.

Market maven John Dessauer thinks the giant chipmaker is gaining ground on a key rival, and he chooses a mortgage lender as another of his favorites...

John Dessauer's 2007 Predictions:

2007 High 2007 Low 2007 Close
Dow Jones Industrial Average 14,120 11,965 13,950
Standard & Poor's 500 1,595 1,380 1,510


Favorite Stock for 2007:
Intel (INTC)

Intel (INTC) is using its considerable financial muscle to take back market share from rival Advanced Micro Devices (AMD). When it comes to Intel's lower net profit margin, this is still better than the best quarter for AMD in the past six years. Intel also has $10 billion in cash. That gives Intel the power to survive even a drawn-out price war with AMD [and] a huge advantage in this ongoing battle for market share. That is clear from Intel's [recent] win with Sun Microsystems: Sun has agreed to use Intel chips in some of its servers, a blow to [Sun supplier] AMD.

As Vista, Microsoft's new operating system, gains traction, sales of PCs will rise. That will be a huge benefit for Intel, especially with its better share of that market. Current estimates for this year range from $1.05-$1.20 a share. However, as we get into the second and third quarters and see Vista's impact on PC sales I won't be surprised to see these estimates being raised.

IndyMac (NDE) reported earnings of $4.82 a share for all of 2006. While disappointing, the 2006 results were 9% better than 2005. [But] the stock came down because of 2007 guidance and uncertainty about what lies ahead for housing and the mortgage industry.

The headlines look awful when they say mortgage foreclosures are up more than 30%. [But] the base is historically low and foreclosure rates are still very low. [Most] previous housing slumps lasted two years and were much more severe than what we have seen so far. Based on this history, some predict the housing slump will get a lot worse. The rest of the crowd worries that the pessimists might be right.

[Yet] the economy remains strong, interest rates remain low, job growth is strong and unemployment is low. This is the first time we have a housing slump that came because of a prior boom. In every past case, the slump was caused by a recession, rising unemployment, high interest rates or a combination of the three. In other words, history is not much help in analyzing this housing slump.

There is strong demand for housing, and that demand is growing as the population grows. [True,] there are house price declines in some markets and in just about all markets the boom has ended. With the latest economic news quite positive for continued growth, I believe buyers will want to buy sooner rather than wait [for] interest rates to rise.

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