Why?
1– There are only a handful of companies which are manufacturing computer chips.
2– Intel is currently paying a 4% dividend yield. Let’s take a look at the past times and what it meant for Intel returns when they payed a 4% dividend yield and more.
3– The geopolitical situation in the world currently favors Intel.
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Amount of big companies manufacturing computer chips is limited.
Lets take a look at the first 10 of them:
Intel (INTC)
2020 Revenue: $77.87 billion
Total Assets: $153.09 billion
2020 Revenue: $52.2 billion
Total Assets: $304 billion
Taiwan Semiconductor Manufacturing Co. (TSMC)
2020 Revenue: $45.5 billion
Total Assets: $89.87 billion
2020 Revenue: $25.27 billion
Total Assets: $56.08 billion
2020 Revenue: $23.89 billion
Total Assets: $75.93 billion
2020 Revenue: $23.53 billion
Total Assets: $35.59 billion
2020 Revenue: $21.43 billion
Total Assets: $53.68 billion
2020 Revenue: $17.2 billion
Total Assets: $22.35 billion
2020 Revenue: $14.78 billion
Total Assets: $26.88 billion
2020 Revenue: $14.46 billion
Total Assets: $19.35 billion
1- All of these companies have experienced difficulties during the past 2 years, mostly because of Covid-19 and supply chain disruptions. This caused stocks most of them going down. Buying any company from this list would be a good investment, no matter which one, because all of them are big and established companies and their product will be in huge demand in near and further future. And of course, some of them are doing worse right now, for example: TSMC or NVIDIA and some other are not doing as well as Intel, but overall no matter which one you pick up they will be safe investments for the long term. You may argue that Intel, for the past 5 years, has been doing particularly poorly because of the poor product execution, bad acquisitions, and poor management, but looking from a different perspective this could be the opportunity to buy Intel stock at a deep discount right now.
2- Intel is currently paying a 4% dividend yield. In the past 15 years when Intel was paying 4% yield, the Intel stock was bringing very good returns. On average, after 1 year of the Intel stock paying 4% dividend the yield was increasing to 45%, after 2 years stock had increased to 62% and after 3 years the stock had increased to 82%. Right now is an excellent time to buy Intel stock because Intel is in turmoil, and as seen in the past this turmoil will be over, and the stock will recover bringing very hefty returns to contrarian investors.
3- Currently Intel is in a privileged position because tensions between Taiwan and China are causing worries between investors who own TSMC stocks. The same situation applies to Samsung, which is located in South Korea, which also has constant tensions with North Korea. Intel, as a USA based company, is enjoying a peaceful environment, and on the top of this, the U.S. government has recently signed The Chips and Science Act passed by the U.S. House on July 28, 2022. This includes more than $52 billion for U.S. companies producing computer chips, as well as billions more in tax credits, to encourage investment in chip manufacturing. It also provides tens of billions of dollars to fund scientific research, and to spur the innovation and development of other U.S. technologies. Intel will be the biggest beneficiary of this new legislation.