Buy, Sell or Hold: Intel Corp. (Nasdaq: INTC) Offers the Security and Profit Potential that Few Other Investments Can

It's not easy to find a safe investment these days. The rulebook has been thrown out and mercantilism reigns supreme between nation states. The world is experiencing significant and rapid changes in currency exchange rates, as policymakers around the world take a beggar thy neighbor approach toward economic security.

There are very few multi-national companies that are not being seriously impacted by these changes.

However, there is one company that should be a safe beacon in these stormy market conditions: Intel Corp. (Nasdaq: INTC).

Intel on Oct. 12 reported its highest quarterly revenue in history, having taken in $11 billion. This milestone had Intel showing an 18% increase in year-over-year revenue.

"Intel's third-quarter results set all-time records for revenue and operating income," said Intel President and Chief Executive Officer Paul Otellini. "These results were driven by solid demand from corporate customers, sales of our leadership products and continued growth in emerging markets."

As for cash flow: Intel over the past 12 months generated $18.6 billion in earnings before interest, taxes, depreciation and amortization (EBITDA). Total revenue in the last 12 months is $41 billion.

What's more is that Intel has no net debt. In fact, it would have more than $15 billion in cash after paying off all of its debt. And the company puts its cash to good use.

Intel reinvests over $5 billion per year in research and development (R&D) to make sure its intellectual property moat is kept secure. It also acts as a technology bank by investing in startup firms with promise.

That means when you buy a share of Intel, you don't just get a piece of the largest chip manufacturer in the world - you receive a stake in a large portfolio of venture capital type investments.

Meanwhile, extremely expensive barriers to entry exist to protect Intel's business plan. And management has been successful in growing its target market beyond central processing units for personal computers to the new smartphone chips that power Google Inc.'s (Nasdaq: GOOG) Android phones.

I believe this is a critical market sector. In 1980, the fastest computer in the world had less than one gigacycle of total processing speed. Today, Intel builds chips that power hand held cell phones that run above one gigacycle. These new cell phones are replacing the need for Intel's current market of desktops and laptops.

Intel stock currently is paying a 3.3% dividend to common shareholders. Ten-year U.S. Treasury bonds are paying around 2.5%, and at this point I would argue that Intel shares represent less risk than debt issued by U.S. government.

So let's do a quick review of why Intel is a "buy" in this economy:

  • The company just posted record quarterly revenue.
  • It has more than $15 billion in net cash.
  • The stock pays a 3.3% dividend yield.
  • And Intel is a reliable blue-chip company.

While Intel is long past the days of a rapidly growing stock price, I believe it offers investors something few other companies can: security.

Intel is the very definition of a safe dividend paying, low-risk company in its cash cow stage.

So let's embrace it.

Action to Take: Buy Intel at market and add it to your long-term investments (**). The stock is trading in the lower half of its 52-week range. It's also above its 50-day moving average, while trading below its 200-day average.

(**) Special Note of Disclosure: Jack Barnes holds no interest in Intel Corp.

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