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Intel (INTC): A Semi-Worthy Association And Value

 December 26, 2012 04:32 PM

(By Rich Bieglmeier) Psychologists call it a form of priming; regular folks call it word association. If iStock says semiconductors – you say? Intel (INTC) probably came to mind, duuuung, da ding, da ding, da ding (the best i could do to mimic Intel's sonic-jingle.)

Semiconductors made iStock's emerging bull list this week. Oddly, it's been our experience and according to market/economic cycle analysis, semis tend to heat up as the economy swings from recession to recovery. Did we miss the recession, did it ever end, and is a GDP minus inflation that hovers around Celsius freezing a recovery? (Sure, there is no inflation, just ask Macke at Yahoo. He says anybody that's noticed rising grocery, health insurance, and fuel bills is a dope because you can get a 60" TV for a smile.)

[Related -Intel Corporation (INTC): An 18.1% Yield From Intel?]

Anyway, we couldn't help but notice that semiconductors as a group appear ready to bloom and outperform the S&P 500 in the days, weeks and maybe months ahead. And, if chip makers are ready to roll, INTC ought to join by association.  

Intel's chart does look good in our view. The chip-maker's share price recently bypassed an upper trend-line connecting descending pivot tops dating back to the beginning of August. The upper boundary repelled shares until December 17, 2012. Now, shares have settled back and are resting on the top-side of the guardrail. It could be a good entry point.

The Dow Jones and NASDAQ 100 member's price has rebounded above INTC's 50-day moving average after bottoming during the market's post-election low. The gains have pulled the 12 and 26-day moving averages within striking distance of putting the 50-day in the rearview mirror. Another couple of plus days, and the pair of moving average will bullishly cross the 50-day, creating a bullish technical buy signal. iStock can see Intel's stock price completing a triangle or "T" pattern, which could carry shares as high as $23 in the near-term, 10.8% potential upside as we type.

[Related -Intel Corporation (INTC) and 5 Other Stocks That Could Pop on Earnings This Week]

Relative to itself, INTC is cheap historically speaking. The stock is valued at 2.09 times its book value of $9.89, which is fractionally higher than the five-year low price-to-book (P/B) ratio of 2.06, and 24.4% below the five-year average P/B of 2.6.

Wall Street currently prices Intel shares for $1.91 for every dollar per share in sales, and with a price-to-earnings (P/E) ratio of 9.04. Both are five-year lows and well below the average of P/S of 2.675 and 16.93 P/E.

Overall, Intel (INTC) appears ready to benefit from renewed interest on Wall Street. Investors have the opportunity to add the iconic brand at or near five-lows for a number of key-metrics. As long as shares stay to the better side of the 52-week low of $19.23, investors might find the semi worth associating with and a good value.


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