“95 percent of the time when you go against that kind of hysteria, you are going to make money.”
– Legendary Investor Jim Rogers, “Buying Value and Selling Hysteria” in Market Wizards: Interviews With Top Traders (1989)
The move in Intel (INTC) is overdone. The stock is now down 25% in the first 11 trading days of 2008 on huge volume (INTC 3 Month Chart).
Take a step back and think about what they said yesterday. They fell short of expectations – but they still made a lot of money: $2.3 billion in fact.
As of right now (3:20pm EST), today is the 3rd highest volume day in the last 5 years (Jan 18, 2006; July 14, 2004) (INTC 5 Year Chart).
These charts and moves say “Panic”. Selling volume has been big since the start of the year. Shares are now about 17-18% below their 200 day moving average. Everybody is selling and very few are stepping in to buy.
But there is value there. When you back out the $2.40 per share in net cash on Intel’s balance sheet it is trading for about 15 times its last 4 quarters income. This is the premiere semiconductor company in the world. Semiconductors are crucial components for computers and all sorts of electronics.
Step in now and hold when nobody else wants to and when some good news surfaces and the panic subsides, buyers will return and you can sell it to them then.
Disclosure: Top Gun is long Intel (INTC) shares.