The world has been chasing the digitization revolution for decades. The pandemic shutdown accelerated the push and the world is at full throttle to get into full digital mode. For this to happen, we need exponentially more computing power. This plays right into technology companies like Intel (NASDAQ:INTC). INTC stock, however, is not feeling the love yet this year.
In fact, the slump started a long while ago, so it’s not a new development. The current share price is the same as it was in 2018. Moreover, this was also a point of contention during the dot-com battle in 2000.
There have been big rallies in the company’s stock, especially from 2017. But there were also pretty deep valleys offsetting the rallies.
INTC Stock Sleeper Trade
In the last 12 months, INTC stock is languishing only up 5%. Its two main competitors Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) are up four and 10 times more, respectively. These two are hogging the headlines because they are being more innovative.
Consensus on Wall Street is that Nvidia is the trendsetter, but I prefer AMD stock. Even though they are both very fast growers and valuation shouldn’t matter, AMD stock is much cheaper.
Speaking of cheap stocks, Intel is most definitely the king of that among its peers. My thesis today is that it is a sleeper winning trade into the middle of next year.
Perception does sometimes influence price in wrong directions. Today, the “loser” tag it carries is the opportunity for patient investors. In reality, Intel is still a behemoth in the field. The good news is that INTC stock does not get the respect it deserves.
All Substance, No Filler
This is a high-tech company that has an 11 P/E, which is lower than Bank of America (NYSE:BAC). A giant tech stock should not be cheaper than a bank stocks. INTC price-to-sales is almost embarrassing at 2.8. In reality, they still grow revenues and net income, and generate $35 billion in cash from operations. Moreover, their gross profit is five times bigger than AMD and three times than Nvidia. It may lack pizazz but it certainly doesn’t lack substance.
This prism is the fault of the management team. It is their job to raise awareness and excitement. Experts are starting to come around on that point, so there might be some green shoots coming. Wall Street has a habit of over-focusing on one side, while forgetting about a sleeper in another corner.
INTC stock could be the one to surprise us soon, but it is definitely taking its time. The window is closing because this bull market is aging. Recently, investor sentiment has soured to the point that we have one foot out the door. The macroeconomic conditions have not deteriorated, but some of the tailwinds are leaving via the taper process.
The Economy Is Fine
We will still have a QE until at least the middle of next year. This is not counting the very low rates, and the trillions already in the economy. If the stock markets stabilizes, INTC stock has opportunities into the holiday season. The political headlines about the debt ceiling are adding to the fears. That’s what politicians do, they take us to the brink to force decisions.
Therefore and first, the Intel bulls have to hold support above $51 per share. This is important so they can tackle the resistance near $58. Until then, INTC stock investors have to sit patiently or use options strategies to put their assets to work. Selling calls against positions in stagnant stocks makes sense for some people. This is like creating synthetic dividends from an asset that is languishing.
I am optimistic, but loading up long Intel stock now is not an obvious winning strategy. Taking partial positions makes for smarter risk management. It really comes down to investor time frames.
There isn’t one answer that fits all investors the same. It is OK to have a very long-term outlook and not care about short-term generations. As it is acceptable to trade around the shorter-term action. Either case, investors would do well not going all in mostly because of extrinsic factors and risks.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.