I recently was asked, “If you could buy a stock for your kids as an inheritance of sorts, what pick would you buy?”
As the father of two girls under age 3, I am no stranger to the idea of long-term financial planning for your family. And personally, if I could buy one stock and put it in a coffee can for 20 or 30 years, I would buy Intel (NASDAQ:INTC).
Some techies might think this is the worst idea ever, considering the waning of the PC. However, if anything, the smartphone surge and tablet craze actually have been very kind to Intel. The stock gained 19% in 2011 and is up by almost as much year-to-date in 2012 to put INTC above its 2007 peak. It’s no surprise why — revenues have gone from $37.6 billion in fiscal 2008 to $54.0 billion last year. So much for weak spending and the mobile revolution eating into sales!
That’s because Intel has a roughly 16% share of the entire semiconductor market — the largest in the world, blowing away the 9% held by No. 2 Samsung. It might not have the sexiest mobile chips, but it is a smaller player in the space and remains dominant in the legacy semiconductor business. After all, chips are in everything from toasters to lawnmowers these days — and demand is growing all the time.
It’s not like Intel is sitting out trends in consumer technology, either. It is pushing forward with its own smartphone technology powered by Atom processors. While INTC admittedly is a bit late to this game, don’t count it out.
Also, with a huge cash hoard, Intel has been getting more aggressive with acquisitions and made a very shrewd buy of online security provider McAfee in 2010. A more wired world means more demand for security. Intel also is getting into cloud computing and has some promising next-generation PC chips for ultrabooks.
The icing on the cake is that thanks to its huge semiconductor output, the reliable revenue at INTC allows for a reliable dividend. The company currently yields 3% per share and is due for another dividend increase soon.
There certainly are short-term pressures on Intel, including the fact that it’s playing catch-up on mobile chips and that overseas spending could hurt demand and weigh on margins. But Intel is the 900-pound gorilla of chipmaking. And though I am reluctant to make any assumptions about the world my two girls will live in a few decades from now, I am certain computer chips will be even more ubiquitous than they are today.
The world our children live in will be even more high-tech, and you can be sure Intel will be there to cash in. That makes it a strong buy for the long term.
Jeff Reeves is the editor of InvestorPlace.com, and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace??.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves did not own a position in any of the investments named here.