Hurray! Stocks Are on Sale!

Let's face it, stocks have been on a wild ride recently, causing many to question whether investing is a good idea. For some, the allure of gold investing has become that much shinier, and for others, their mattress is singing a soothing song of safety. However, for the bold, now is the time to buy, and there is one company out there just begging to be noticed.

Intel does it better
When you think of computers, what comes to mind? Macs? PCs? Perhaps what should come to mind is the kind of processor the computer runs on. Whether your favorite computer is a Dell, Sony, Gateway, Mac, or any other popular brand, the processing system behind each of these is likely an Intel (Nasdaq: INTC  ) Core processor. And with each of these brands relying on Intel to supply them with processors, Intel has become a behemoth in the technology world.

For example, over the past few years, Intel's net income grew from $5 billion in 2008 to over $11 billion in 2010. Additionally, free cash flow grew from $5.3 billion in 2008 to $11.5 billion in 2010, and operating margin grew from 24% in 2008 to 36% in 2010. That's great news for investors who are greeted day in and day out with stories about the declining relevance of the PC. In the face of all this, Intel has been able to maintain its pricing power.

Intel on sale
Although Intel took a slight tumble with the rest of the stock world, it is by no means a sign that Intel is headed for disaster. If anything, Intel's recent tumble is signaling that Intel is currently on sale, and now is the time to get in.

Currently, Intel is trading right around $20 per share, or a little more than 9 times earnings. That is a great price for the technology giant, and well below its historical earnings multiple. If that's not enough to interest you, maybe its dividend yield of 4.2% will. Compared to competitors Microsoft's (Nasdaq: MSFT  ) dividend yield of 2.5%, Advanced Micro Devices' (NYSE: AMD  ) dividend yield of zilch, and Texas Instruments' (NYSE: TXN  ) dividend yield of 2%, 4.1% is definitely an attractive number. Plus with a payout ratio of 31%, Intel's dividend yield looks sustainable.

Don't give up on the market just yet
Yes, stocks have definitely shown their volatility over the last few weeks, and it's probably not the last time we'll see this happen. Still, for Foolish investors, situations like these can be seen as great companies going on sale. In the case of Intel, that is exactly what's happening.

Want more great investing ideas? The Motley Fool's free report, "13 High-Yielding Stocks to Buy Today" details 13 dividend-paying companies that just might make a great investment. With cash and Treasuries yielding mere pennies on the dollar, your best bet to beat inflation is in high-yielding stocks like the 13 The Motley Fool has uncovered. Click here to access your free report today!

Fool contributor Katie Spence loves it when stocks go on sale. She does not own shares of any company mentioned above. The Motley Fool owns shares of Microsoft and Texas Instruments. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Microsoft and Intel. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a diagonal call position in Intel. 

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (9) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 02, 2011, at 11:42 AM, MaxTheTerrible wrote:

    Recently I got myself a great new laptop - Sony VAIO S. It has a shiny sticker that says "Intel Inside". Then two weeks ago I used that laptop to purchase yet another batch of INTC shares. INTC is already >6% of my portfolio and I'm seriously thinking of buying more. At P/E of 9, growing cash flows, revenues, more than 4% yield with a low payout ratio - what's not to like?

  • Report this Comment On September 02, 2011, at 11:46 AM, TheDumbMoney wrote:

    "what's not to like": Surprisingly high beta stock, which is currently sporting an historically high and potentially-unsustainable profit margin.

    That said, I love it too, and am looking to add, though I see it going lower from here. That dividend provides it a lot of price support though.

  • Report this Comment On September 02, 2011, at 12:02 PM, lazytype wrote:

    The only threat are those fanless ARM chips, but not in the server market.

    Anyway, if there're liquidity problems in banking system, market will plunge deeper.

  • Report this Comment On September 02, 2011, at 3:11 PM, ldkoehler wrote:

    INTC is a great buy. The current price of ~$19.65 implies that Intel's free cash flow will permanently decrease by 30%. That's an extremely low hurdle for a stable, profitable company with an impressive 31% ROIC last year, and an ROIC above 12% for the last 8 years.

    While the rise of ARM chips in mobile devices are a threat to Intel's business, Intel has over $25 billion in excess cash and a quality management team with a long track record of profitable investment and product development.

    I think they'll do far better than a decline in cash flows of 30%.

    For more information on quantifying market expectation, see: http://blog.newconstructs.com/2010/05/19/how-to-make-money-p...

    Important Disclosure: I am employed by a research firm that is a affiliated

    with a hedge fund that owns shares in INTC.

  • Report this Comment On September 02, 2011, at 9:34 PM, apokillypse2k wrote:

    I just bought some INTC today after seeing it under 20. Couldn't resist.

  • Report this Comment On September 04, 2011, at 7:59 AM, wealthbuilder88 wrote:

    Be patient, INTC price will go down following major downtrend. Wait for better value.

  • Report this Comment On September 05, 2011, at 10:54 PM, Eerkes wrote:

    little bit shallow

  • Report this Comment On September 06, 2011, at 12:52 AM, ShaunConnell wrote:

    Good article! This stock is on my short list of possible buys.

  • Report this Comment On September 06, 2011, at 8:42 AM, Franky102 wrote:

    Google the phrase, "why apple is still an amazing buy" and you'll see probably the cheapest/safest stock right now.

    Sometimes the near $400 price tag scares people but the logic of that argument makes no sense. They keep beating Wall Street and are a dominant force internationally.

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