Intel Corporation (INTC): These Semiconductors Shall Lead

Currently trading around a cheap 11 times earnings, I expect shares to outperform going forward, especially since the shares have stabilized, having not hit a new low since November. Also, small cap stocks have led the way in 2013, and that should boost Cypress as they are the “small cap” Intel. This Cypress will not be needing a bailout of any kind.

Don’t ignore the gorilla

I am still pounding the table for Intel, one of the safest, high yielding, great businesses in the world. IIntel Corporation (NASDAQ:INTC) has been ramping up R&D spending. Some have complained Intel has lagged getting into the mobile phone chip market, yielding to competitor ARM Holdings. But ARM doesn’t own chip making plants and Intel can build a cutting edge chip plant for around $5 billion.

Being the 800-pound gorilla of the semiconductor group, they outspend their competition and have a huge talent pool, making them the top innovator. With $18 billion in cash and around $13 billion in debt, it could literally pay its debt and still have billions left over. And they distribute that cash to their shareholders in the form of a nice 4.3% dividend (which they have increased in 18 of the past 20 years and never cut) and also institute share buybacks. Even if it goes nowhere in the next few years, you’ll still get their inflation beating dividend that they can still easily increase having that stellar balance sheet.

The takeaway

Investor friendly share buy backs, generous dividends, and unfairly depressed share prices, coupled with the exploding mobile phone market make it hard to go wrong in these names. Besides investing in these stocks for the hardware, It is also possible to capitalize on the software that these company’s products will power in the future.

For example, I have recently subscribed to a new app that allows even the common person to profit from the mobile app industry without being a developer. A no brainer investment for the price of 2 cups of coffee per month. It is just one example of the type of revolutionary products emerging from the mobile industry. And one of the tangible reasons the semiconductor companies are putting their big bucks to work for.

The article These Semiconductors Shall Lead originally appeared on Fool.com and is written by Joe Sabatucci.

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