How I evaluate a stock - Example Intel

Someone recently asked me how I evalutate at stock. Here's my basic process. First of all I want to make money on a stock. I don't buy stock just for the fun of it. I buy with an expectation of a return. And my return horizon is less than 5 years.

1. Am I familiar wiht the company? Have I read articles about the company over time (Example)? Is the company a major player in its industry sector?
   
2. How do I expect to make money? Generally I expect to make money on both dividend returns and stock growth. I almost exclusively invest in dividend stocks.With Intel I expect to hold this for a long term and enjoy the dividend returns. 
3. Do I expect growth? If not, I pass.
4. What is the P/E ratio? Defined . Caveat: The P/E ratio looks at the last 4 quarters of profit. It is not forward looking. Generally I look for a P/E ration of less than 20. 
   
5. What is the Dividend yield? In the case of INTC, it pays an annual dividend of $ .90 and the price of the stock is about $ 30. So the yield is .9 / 30 or 3%. 
6. What is the Payout Ratio? INTC earned $ 1.87 per share over the last 4 quarters. That's a gross yield of 6%. The Payout Ratio is EPS / Dividend = 48%. If all of the earnings are paid out in dividends, it means that nothing is kept back for R&D. Not a good thing. A company with an unprofitable quarter may have a Payout Ratio of greater than 100%. They may be able to sustain that for a few quarters but not over the long term. 
7. What is the Enterprise Multiple? This topic is a bit complex so click through to my longer blog post. I look for an Enterprise Multiple of less than 11.
   
8. How does the stock compare to the company's competitors? finance.yahoo.com is my go-to website for all of this information. 

Conclusion: Intel is a buy for me. We currently have holdings in INTC. We are not adding to that at this time.

Pentium: Happy 20th Birthday

Intel Pentium turns 20 today, reminds us they don't build 'em like they used to (video)

Wiki: Pentium

Intel Is the Biggest Bargain Out There?

Intel Is the Biggest Bargain Out There: Fort Pitt’s Forrest
Excerpt:

"At this point in time, I couldn't be happier owning this stock because I really think 2013 is going to be the year in which they begin to show some traction," Forrest says in the attached video. "I think people have really underestimated what this company can produce." Forrest believes Intel can overcome its power efficiency problem sooner than its rivals at ARM (ARMH) can overcome its computing power disadvantage. "My bet is that the engineers at Intel will win this" she says. To gauge how that fight is going, Forrest recommends that investors keep an eye out for any signs of Intel pushing into the lower end smartphone business. Of course, there are plenty of skeptics out there who aren't impressed with the company's 4.3% dividend yield that is high, and rising. In fact, just 35% of the 51 analysts who follow Intel rate it a "buy" right now, which means the stock is the least loved it has been in at least 20 years, FactSet data shows.

Comment: We have in IRAs. It's gone down! Good dividend stock and I don't see selling it (since the capital gains / loss rules do not apply to IRAs). But I'm not buying more.

High Tech Coke Machine

Futuristic Coke Machine Sports An Intel Core i7 Processor Excerpt:

Intel revealed a futuristic Coke machine powered by the company’s Core i7 microprocessor, according to Venture Beat. The contraption looks like something straight out of a science fiction flick, complete with a large digital display, a high-definition camera, and Wi-Fi capabilities

Intel technology drives intelligent Coke machine Excerpt:

If you’re expecting to see rows of Coke bottles, as you would in an average vending machine, think again. The fascia of this machine is dominated by a massive 46in multi-touch screen, on which the user can view what’s available and swipe around to the type of Coke they’re after.

Comment: Created by SIA Interactive. My brother used to have a working vintage Coke machine in his bedroom (he worked for a vending company in the Summers while in college). It looked about like the image below.

Intel ... toe in water

It wasn't a major purchase .. but I bought my first shares (only 5) of INTC yesterday. The Wiki article on Intel is pretty interesting as is the corporate site (Check out "See what 40 years of innovation looks like"). My first computer had an Intel 8080-compatible Z80

My son asked me why I bought Intel. Answer: They are big.  They are public (listed). They are profitable. They pay a dividend. Chart from yahoo finance.

Intel chip naming strategy

Intel's Chip Renaming Strategy Meets Resistance

Excerpt:

The chip company on Wednesday said it was making changes to the naming convention of Core processors, switching the derivatives attached to it. Tags like Core 2 Duo and Core 2 Quad will be replaced by names like Core i3, Core i5 and Core i7, depending on the type of PC and configuration.

Chips for entry-level desktops and laptops will carry the Core i3 brand, while chips for mid-level and high-end PCs will have Core i5 and Core i7 tags respectively. The Core i7 tag is already being used on Intel's Nehalem-based chips that go in high-end desktop PCs.

Intel said it will continue to use its Atom brand for low-power processors used in netbooks and smartphones. The company will also retain the Celeron and Pentium entry-level chips for mainstream laptops and desktops. In platforms, the company said it would phase out usage of the popular Centrino brand to describe mobile laptop platforms by early next year.

Comment: My Linux netbook has an Atom chip.