Everybody on Wall Street despises microprocessor manufacturing giant Intel (NASDAQ:INTC), right? That’s actually an unfounded assumption, as some big-money investors are holding large quantities of INTC stock. Maybe they know a good value when they see it, or perhaps they’re bullish on Intel as the chipmaker lays the groundwork for significant cost reductions.
If you’ve been monitoring the semiconductor industry, you’ve probably heard about the challenges facing chipmakers like Intel. These include PC-market weakness, high inflation and, somehow, a chip glut amid supply-chain disruptions.
The combination of these factors has precipitated a steep year-to-date (YTD) decline in INTC stock. Nevertheless, some well-capitalized firms are staying the course with Intel. So, let’s take a quick peek at five of these apparently contrarian institutional investors (according to filings as of June 9, 2022).
These 5 Investors Are Still Betting Big on INTC Stock
By the way, you’ll notice some overlap between these five investors and five large-scale shareholders of Advanced Micro Devices (NASDAQ:AMD) stock. Is it possible that these big firms are buying what anxious retail chip-stock traders are selling?
- Vanguard: a supersized position of 357.8 million INTC shares, which represents 8.67% of the outstanding shares.
- BlackRock (NYSE:BLK): 347.95 million shares, or 8.43% of Intel’s outstanding shares.
- State Street (NYSE:STT): 176.15 million shares of INTC stock, which translates to 4.27% of the outstanding shares.
- Capital International Investors: 87.68 million Intel shares, or 2.12% of the outstanding shares.
- Geode Capital Management: a position consisting of 79.98 million shares, which equates to 1.94% of the outstanding shares.
Intel Offers Deep Value and Announces Cost-Cutting Plan
So, what do these high-rolling firms see in downtrodden Intel? Quite possibly, investors like Vanguard and BlackRock are in the market for deep value, and they certainly found it with Intel.
Since so much bad news had already been baked into the proverbial pie, INTC stock now trades barely above its book value — 1.17x, to be specific. Also, Intel’s trailing 12-month price-to-earnings (P/E) ratio is extremely reasonable at just 8.47x.
Along with that, the aforementioned investors may be encouraged to stay in the trade with Intel due to the chipmaker’s announced cost-reduction efforts. Even while Intel maintains a firm balance sheet with cash balances totaling $23 billion, some shareholders undoubtedly wanted the company to reduce its future expenditures during these uncertain times.
To that end, Intel plans to implement $3 billion worth of cost reductions in 2023. By the end of 2025, the company intends to drive $8 billion to $10 billion in annual savings. Intel CFO Dave Zinsner clarified that the savings “will be realized through multiple initiatives to optimize the business.”
These will include the usual suspects, such as portfolio cuts and the “right-sizing” of Intel’s support organizations. However, there will also be “more stringent cost controls in all aspects” of Intel’s spending. Additionally, expect Intel to utilize “improved sales and marketing efficiency” to further reduce the company’s outlays.
Join the Big Spenders With a Small Stake of Your Own
If you like what you’re hearing about Intel’s value proposition and proposed spending reductions, then here’s some good news. You don’t have to have a Vanguard- or BlackRock-sized account to participate in Intel’s potential upside.
So, consider a small position in INTC stock if you’re ready to join the club. After all, it’s a club with some major Wall Street whales, and you’re invited to dive into the deep end if you dare.
On the date of publication, David Moadel 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.