Our Rule Maker articles may have taken on an all-Gap (NYSE: GPS), all-the-time feel to them this week, but at the risk of beating a dead horse, today I'd like to use Gap and Intel (Nasdaq: INTC) to make a point that I don't think can be over-emphasized in investing: Watch the business, not the stock.

With Gap shares nearing their 52-week low, some of the folks on the Rule Maker Strategy board are wondering why we didn't consider selling Gap earlier. After all, if we had sold Gap at $53 back in February, we'd be sitting pretty right now. Those same folks suggest that selling Gap now, after the plunge that our shares have experienced, is akin to shutting the barn door after the cow gets out. Why sell now? It seems to go against the buy-low, sell-high maxim. Even if we decided to sell Gap, why not wait until things look a little better before selling? The reason is: We watch the business, not the stock.

We are fully cognizant of the possibility that Gap stock could bounce back from here. In fact, it's highly likely that it will. The second half is always better for retailers, and Gap is no exception. In fact, Gap pretty much lives for the fourth quarter, which is usually the only quarter of the year that the company manages to generate any significant free cash flow. The stock may well recover some of what it's given up. Bob Fredeen, who covers Gap for Motley Fool Research, thinks it might be a good time to get some Gap shares while the company is out of favor. In his recent research feature, Bob points out that Gap has gone through some tough times before, and recovered well.

But, we watch the business, not the stock. Bob also points out that Gap's inventories have grown faster than sales for eight straight quarters. Gap's free cash flow in the first half was a negative $725 million, versus only a negative $255 million the year before. It's only taken Gap six quarters to go from $587 million in total debt to almost $1.9 billion. One of the realities of business -- and nature -- that people forget is that it almost always takes longer to rebuild than it does to destroy. Gap was able to add $1.4 billion in debt in a mere six quarters, but it will take them many, many years to pay it back down.

In short, my recommendation to sell Gap has nothing to do with Gap's stock price. It has solely to do with this: When I look at Gap's business, I see a company that, in the space of a mere six quarters, has gone from a Rule Maker to a company that doesn't remotely approach Rule Maker standards.

Let's contrast that with Intel, which by all indications is going to get smacked by the market today after issuing a press release yesterday evening stating that sales will not meet Wall Street expectations for the third quarter. Our own Rob Landley wrote an article last week that clearly suggested some trouble is afoot for Intel, and his timely call turned out to be pretty uncanny. So, should we consider selling Intel, too? Again, although we may lose a little money in the short-term on Intel, we are watching the business, not the stock.

Let's take a close look at the information the company is providing here, and look away from the stock quotes for a second. Based on the press release, Intel expects that third-quarter sales will increase by only 3-5% over the $8.3 billion recorded in the second quarter. Unfortunately, analysts were expecting more like 10-12%, or sales of well over $9 billion. The company noted that gross margins are now expected to come in at 62%, instead of the previous expectation of 63-64%. While this certainly isn't good news, it is hardly reason for us to consider selling Intel. Let's look a little closer at the business, ignoring the fact that the other news stories you'll see today will be of the "sky is falling" variety.

Intel's press release goes into some pretty good detail about what to expect in the coming quarter. So detailed, in fact, that I decided to run the numbers (using the most conservative number if presented with a range) to see how Intel will fare on our six Rule Maker financial criteria for the third quarter.

My best guess is that Intel will do $8.55 billion in sales, or about 17% greater than last year. Gross margins should be around 62%. That leaves about $5.3 billion in gross profits, from which one must subtract about $2.4 billion in expenses and $1.19 billion in depreciation and amortization of goodwill (both of those numbers are taken from the press release). Adding in $900 million in interest income, I get about $2.61 billion in pre-tax income. Intel expects the tax rate to be about 31.8%, which leaves us with $1.78 billion in net income. That's about 23% growth in net income from the third quarter last year.

In short, I expect Intel to exceed every single Rule Maker metric with flying colors in the third quarter. Sure, Wall Street analysts expected more, but we don't focus on Wall Street expectations for our companies. We know that when a company disappoints, whether it be revenues, earnings, or what have you, the stock gets hammered in the short run. But as long as the business continues to show strength, we don't particularly worry about it. We focus on the business, not the stock. As the business increases in value, over time so will the stock.

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Have a great weekend!