News Analysis date published New: 
Monday, September 17, 2012 - 14:30
New Date created: 
Monday, September 17, 2012 - 14:30
New Date last updated: 
Monday, September 17, 2012 - 14:30

A Ridiculously-Cheap Opportunity to Buy This "Forever" Stock

Monday, September 17, 2012 - 2:30pm

It's the best opportunity to buy this "Forever" stock since the start of 2012.

I've told you about "Forever" stocks several times. Put simply, these are the stocks I think you can buy, hold, profit from and basically forget about -- all without losing any sleep at night.

These companies enjoy huge (and lasting) advantages over their competition... pay their investors increasing dividends... and buy back massive amounts of their own stocks.

As you would expect, the opportunity to pick up "Forever" stocks at dirt-cheap prices is rare.

But it does happen. And that's exactly what's happening with shares of Intel (Nasdaq: INTC).

Is Intel a "Forever" stock? Absolutely.

It's the world's largest semiconductor maker. It owns 80% of a $30 billion market, according to Morningstar.

Intel's business throws off enormous amounts of cash, and management is putting that money in shareholders' pockets.

That's why dividends per share have increased 99% in the past five years... and are up 42% in just the past two.

During 2011 alone, Intel bought back 468 million shares worth $10 billion. And looking ahead, management has allocated another $7.5 billion to future buybacks.

But all of this says nothing about the opportunity I'm seeing to buy the shares right now.

You see, even with "Forever" stocks, no investment always goes up. In fact, late last week Intel cut its revenue guidance for the quarter from roughly $14 billion to a little over $13 billion. Investors dumped the shares.

Going back even further, Intel's share price has dropped almost 15% in the past month. The stock now trades at its lowest level since the beginning of 2012... despite dominating its market... jacking up dividends... and buying back billions of dollars worth of stock.

Although the shares have fallen, I see a company that continues to dominate over the long term...

Consider that in the past year, Intel has generated $54.5 billion in revenue -- 17% more than in 2010, and 56% more than in 2009.

Yet despite Intel's steady revenue growth, the stock actually trades below where it traded five years ago.

Thanks to the recent sell-off, Intel's shares now trade at an unbelievably low valuation. Earnings are projected at $2.38 per share this year. That gives Intel a price-to-earnings (P/E) ratio of just 10. For comparison, the average P/E for the S&P is 19.

Intel's lowered guidance and recent downturn is a perfect example of what causes most investors to lose money in the market. The financial press jumps on short-term stories like this. When Intel announced its lowered guidance, dozens of articles reported the same news, using phrases like "slashes outlook" and other scary terms that can cause investors to question their holdings.

And for too many investors, the instant a stock falls, they want to know if they should sell. It doesn't matter if the underlying company still has a bright future or not (in this case, Intel certainly does). It doesn't matter if the company is returning billions of dollars to shareholders each year via dividends and share buybacks (in this case, Intel continues to reward its shareholders). Instead, the fear of losing money is simply too much for most small investors to stomach.

I'm convinced this is why most investors lose money in the market.

Investors driven by fear and short-term market moves are the ones who sell when the market falls... and buy when the market is rising. This is a perfect recipe for losing money.

I'd love for every stock I buy to steadily rise.

But I've been investing for 20 years, and during that time span I've never seen a stock rise consistently day-in and day-out. Every stock experiences short-term downturns -- even the market's biggest winners.

Take a look at Apple (Nasdaq: AAPL). Those who panicked and sold the stock when it tumbled in 2001 and 2008 have missed out on one of the biggest corporate success stories of the decade...

Meanwhile, those who didn't panic -- but instead held the shares when the stock pulled back -- have been rewarded with 2,500% gains over the past 12 years.

The truth is, sell-offs like the one Intel has experienced in recent weeks are opportunities to pick up shares of great stocks at bargain prices you wouldn't see otherwise. That's how I want you to view the market.

And right now, the opportunity in Intel is the best of the year.

[Note: Intel is a member of an elite group of investments I like to call "Forever" stocks. These companies enjoy huge advantages over their competition... pay their investors increasing dividends... and buy back massive amounts of their own shares. So far, I've only found 10 stocks that make the grade. If you'd like to learn about the rest of my "Forever" stocks -- including several names and ticker symbols -- follow this link.]

Paul Tracy owns shares of INTC.
StreetAuthority LLC owns shares of INTC in one or more of its “real money” portfolios.