Motley Fool: Semiconductor titan is down but not out

The Motley Fool Take

Shares of semiconductor giant Intel were recently down nearly 37% from their highest point over the past year. Why? Well, on top of worldwide inflation fears, Intel is wrestling with a lengthy global shortage in semiconductor manufacturing capacity and materials, and smaller rivals such as Advanced Micro Devices and Nvidia are nipping at its leading market share in key sectors, such as data center products.

Intel has been around since 1968, building a unique legacy and a massive infrastructure. The company — often called “Chipzilla” — had $38.7 billion in cash and short-term investments at the beginning of April and generated $9.7 billion of free cash flow in fiscal year 2021. It’s a fantastic cash machine, and management isn’t shy about putting that cash to work in the form of new or upgraded chip factories.

Right now, the company is boosting its manufacturing facilities like never before — for example, building a $20 billion chip facility in Ohio (though this may be delayed).

Intel has been down many times before, but the company always finds ways to spring back. With a recent price-to-earnings ratio around 7.6 (compared with its five-year average of 13.1%) and with a generous recent dividend yield of 4.1%, this down-but-not-out semiconductor titan should interest long-term investors seeking promising value. (The Motley Fool owns shares of Intel and has recommended Intel stock and options.)

Ask the Fool

From J.P. in St. George, Utah: Where might I look up a company’s stock splits?

The Fool responds: Start at the horse’s mouth, by calling the company’s investor relations department and asking. An “Investors” section of the company’s website might also have that info. Or head to Finance.Yahoo.com and type in the company’s ticker symbol; you can then click on “Statistics” and scroll down to see the company’s last split and its date, or click on “Historical Data” to look up many past splits. Searching online for “stock split calendar” will show you recent and upcoming splits.

Don’t get too excited about splits, though. They may be kind of exciting, but they really aren’t that meaningful. Yes, a regular stock split will suddenly leave you with many more shares — but the share price will have been adjusted downward proportionately. So if your 100 shares became 200 or 400 shares, your previous stock price will have gone from, say, $40 to $20 or $10, respectively, leaving your investment’s total value unchanged.

From Y.G. in Homewood, Ala.: Warren Buffett’s mentor, Benjamin Graham, reportedly said: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” What does that mean?

The Fool responds: When measured in days or even months, a stock’s price reflects its popularity, with investors “voting” by buying and selling, sending prices up and down. Hot stocks will rise in price, while out-of-favor stocks will slump. But over the years, a stock’s price will reflect or approach the value of the underlying company, based on factors such as revenue, earnings and projected growth rates. A stock’s true intrinsic value is what really matters, making it smart to be a long-term investor.

The Fool’s School

One of the best gifts you can give your kids is helping them become savvy about money. Here are some ideas:

Talk about money regularly. Let your kids see how you make financial decisions and work toward financial goals — and even how you pay bills. Discuss your successes and challenges. Help them learn what things such as housing, utilities and gasoline cost.

Get kids interested in investing in stocks via a mock portfolio. Whether on paper or via an online portfolio tracker (available at sites such as Finance.Yahoo.com), assemble a bunch of publicly traded companies your kids know and admire, including their ticker symbols and stock prices as of the day you add them. (Candidates might include Amazon, Apple, Coca-Cola, Costco, Disney, General Motors, Hasbro, Mattel, McDonald’s, Microsoft, Netflix, Nike, Starbucks and Walmart.) Pretend they’ve bought shares, then start following the companies in the news and checking their quarterly reports, seeing how the share prices fluctuate and shrink or grow over time. Show them how much their investments would have earned; stress that long-term results are what really matter, and that even great companies can slump over a few months or even a year.

Let your kids invest. When you think they’re ready, you might help them start actually investing via a custodial account opened at a major brokerage. Or be less formal and buy a few shares at their direction in your own account. Kids can fund Roth IRAs, too, if they have earned income (even from babysitting).

An online search for “Money as You Grow” will turn up a Consumer Financial Protection Bureau site full of activities, teaching tips and resources for kids of various ages. Younger kids can also learn from the “Warren Buffett’s Secret Millionaires Club” cartoon series, which is on YouTube and elsewhere.

And finally, you could have them check out our book, The Motley Fool Investment Guide for Teens by David and Tom Gardner with Selena Maranjian (Touchstone, $17).

My Dumbest Investment

From K.K., online: Back in 2009, I owned 200 shares of UnitedHealth, and article after article said companies like it were doomed with the coming of Obamacare. My financial adviser said that was just noise and that most health insurance wouldn’t become public, but I didn’t heed her, and I sold my shares.

In hindsight, she was right — and I missed out on many thousands of dollars of gains. I learned that one must understand the politics of a situation, regardless of what number analysts say.

The Fool responds: Yes, your adviser turned out to have been correct — but it might not have ended up that way. Your lesson — that it’s valuable to understand the big picture surrounding any company — is a good one, though. Remember that you might have spent a lot of time reading up on and thinking about the future of health care in a world with the Affordable Care Act, and you might have come to a different conclusion.

There are often conflicting opinions and projections about various companies’ prospects, and no investor will always be right. That said, the more you know, the better decisions you’re likely to make.

This isn’t such a dumb investment, since you didn’t actually lose money. And if, after selling your shares, you moved the proceeds into another stock that did well, you might have benefited. There are plenty of terrific, growing companies.

Who am I?

I trace my roots back to Denmark in 1904, when a father and son bought a used steamer ship and launched a shipping business. An early cargo was Ford Motor Co. car parts. I ran a shipyard for nearly 100 years, too. I got into the oil business in the 1970s, but more important, got into container shipping, too. Today, I’m one of the largest cargo shipping companies in the world, with 67 terminals in 42 countries, more than 730 container vessels deployed, more than 100,000 customers and around 95,000 employees. I move nearly 20% of global shipping. Who am I?

Can’t remember last week’s question? Find it here.

Last week’s trivia answer: Taylor Morrison