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Insider Bets His Chips on Intel

12/18/2019 5:00 am EST

Focus: TECHNOLOGY

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Warren Buffett — one of the greatest home run hitters of them all — once remarked that investors don’t have to swing at every pitch, asserts Mark Skousen, growth stock expert and editor of Home Run Trader.

Indeed, you can sit there with the bat on your shoulder until a big, fat one comes right into your sweet spot. Intel (INTC) — at today’s price — is one of those pitches.

Let’s start with a history lesson. In 2000, Intel had a market cap of $274 billion. Today, it’s market cap is just $253 billion. Yes, the stock is cheaper today than it was two decades ago.

Yet Intel is one of the world’s great chipmakers, the dominant player in personal computer (PC) and server microprocessors. And now it is aggressively pushing into new markets like processors for machine learning and artificial intelligence (AI).

AI is a broad term for computers that think like humans. Companies at the vanguard of this industry have seen dramatic appreciation in their share prices.

Intel could be next. A few years ago, the company bought deep learning start-up Nevana. Intel also acquired Mobileye, making it an early leader in autonomous driving. And it bought Movidius, a maker of vision chips for drones.

These acquisitions -- along with organic growth -- will cause sales and earnings to push substantially higher in the weeks and months ahead. I estimate that Intel will earn $4.61 a share this year and more than $5.25 a share during the next 12 months.

Yet the stock is ridiculously cheap — a perfect pitch for investors — at less than 12 times prospective earnings, especially compared to the prospective price-to-earnings (P/E) ratio of 16 for the S&P 500.

Someone who clearly agrees with my analysis is Intel Director James Goetz. On November 15, he purchased 86,220 shares at $57.88, an investment of $5 million. Five days later, he bought another 86,500 shares at $58.23. He now owns 172,720 shares.

Do yourself a favor and follow his lead. There is plenty of appreciation potential here. Plus, you’ll earn a 2.2% dividend yield. I suggest you buy Intel at market. And place a sell stop at $46 for protection.

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