1 Great Stock for the Holidays

Just because it's the holiday season, that doesn't mean you should neglect your portfolio. While the Dow Jones Industrial Average (INDEX: ^DJI  ) is up only 3.5% for the year, it very well could ascend further between now and the end of the year if lawmakers in Washington are able deal effectively with the fiscal cliff -- a possibility that seems increasingly likely given the positive signals emanating from the nation's capital. With this in mind, here is one Dow stock that offers a combination of value and yield.

Intel (Nasdaq: INTC  ) .

Now, I know what you're thinking: Intel, really? Doesn't it rely on the personal computer market for the lion's share of its sales? And isn't that market declining? The answers to these two questions, of course, are "yes" and "yes." Yet this doesn't mean the chipmaker isn't a bargain at its current price and yield.

On a strictly quantitative basis, Intel is patently cheap. It sells for a ridiculous 8.44 times earnings and yields a generous 4.4%. In addition, it's currently trading at a 52-week low. Consequently, if you're someone who likes to buy high and sell low, then Intel isn't for you. But if you're interested in more than just a tax deduction, here's why Intel presents such an attractive opportunity.

As my colleague Travis Hoium explains in detail here, the hoopla about the "death of the PC" is premature at best. While there's no denying that PC sales are down this year, the tenor of the financial media has blown the trend way out of proportion. As Travis notes: "PC sales have slowed recently, but we're only talking about a predicted 1.2% decline to almost 350 million units in 2012. That's still big business, and Intel is at the center of it."

Consider these figures from another colleague of mine, Alex Planes: "The PC's dying? Really? Five years ago, 271.2 million machines were sold in the worldwide PC market, according to Gartner. The first three quarters of 2012 have been very close in terms of sales, with 88 million PCs sold in the first quarter, 87 million in the second quarter, and 87 million in the third quarter. Annualize the numbers out and you get 351.9 million PCs sold for the year."

As Alex notes, in turn, that equates to a 30% increase in five years. Not exactly what he or I would consider evidence of dying.

In addition, it's commonly assumed that many PC purchases were put off until Microsoft (Nasdaq: MSFT  ) released its new operating system, Windows 8. With that now out and preloaded on computers and tablets in virtually every electronics retailer throughout the country, there's every reason to believe that the downward trend could bottom out sometime this year -- and particularly if the fiscal cliff is resolved and business investment picks up.

Assuming this happens, Intel will be perfectly positioned to exploit it. It dominates its industry and spends significantly more on research and development than competitors such as AMD (NYSE: AMD  ) . In the middle of October, for instance, AMD announced that it's slashing its workforce by 15%, or 12,000 employees. Not to mention, while there's no question that Intel has thus far largely missed the smartphone and tablet boat, that, too, could change assuming that the incoming CEO, whoever that may or may not end up being, places due emphasis in these areas.

The Foolish bottom line
At the end of the day, and particularly considering its generous dividend yield, I believe Intel presents an attractive value proposition. It's for this reason, in turn, that I am planning to go long on its stock as soon as I am allowed to under our trading guidelines. To learn if you should follow suit, check out our new in-depth report on the chip giant. The report comes with regular updates and can be accessed immediately by clicking here now.


Read/Post Comments (3) | Recommend This Article (5)

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 November 22, 2012, at 3:44 PM, TEBuddy wrote:

    Well, AMD only has about 12,000 employees, and I believe they cut about 10%. They really need to downsize to cut operating expenses now that they are just a design house mainly.

  • Report this Comment On November 22, 2012, at 10:54 PM, BimmyBoris wrote:

    The yield is actually 4.6% at the current price. And INTC has about 10 BILLION is cash sitting around to expand its business into mobile. Not sure why people are selling at this level. Even Cramer just shakes his head and says BUY.

  • Report this Comment On November 23, 2012, at 12:24 AM, JohnMaxfield37 wrote:

    TEBuddy --

    You're correct. I added one too many zeros. The estimated job cuts at AMD, as you noted, is somewhere in the neighborhood of 1,200.

    Thanks for the catch!

    John

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