Should You Buy the Dow — Intel

Today, were looking at Dow Jones Industrial Average component Intel (NASDAQ:
INTC ). Intel is known for making chips for computers, but whats the broader
scope? Well, the chips or microprocessors are put into servers, workstations,
storage products, embedded applications, communications products, consumer
electronics devices and handhelds. These little boogers handle graphics, audio
and video, input, display, storage devices, CDs, DVDs and Blu-ray drives. Beyond
chips, the company makes flash memory products and software products comprising
operating systems, middleware and tools used to develop devices. Additionally,
it develops computing platforms, which are integrated hardware and software
computing technologies designed to offer an optimized solution. My head is
already spinning, but near as I can figure, it the key driving factors regarding
Intel are the economy and competition. One thing I know about competition is
Intel doesn't have much of it. Sure, there are some companies that make chips,
but Intel is the gold standard and the big brand name. Then there are the
repeated fines from the government over monopoly abuses. I might not know tech,
but I know investing, and I want a monopoly if I can invest in one. So I would
hope that Intels financials are stellar, because if you have a monopoly and your
financials stink, youve got bigger problems than the FTC. Intel carries $11.5
billion in cash against only $2.1 billion in debt, for a net cash position of
$9.4 billion, or $1.80 per share. So debt is not an issue with Intel. Cash flow
is fantastic. Even during the financial crisis in 2008-09, the company generated
$5.8 billion and $6.6 billion of free cash flow, respectively, and leaped to
$11.4 billion in 2010. Intel is a cash machine. Stock analysts looking out five
years on Intel see annualized earnings growth at 11%. This is heartening for a
company that is this mature. Fortunately, processors are one of those products
that are constantly being improved, so theres always a new one to buy. At a
stock price of $21 (backing out net cash), on FY 2011 earnings of $2.36, the
stock presently trades at a P/E of only 9. Conclusion Intel looks like a value
play with a P/E of 9 and long-term growth of 11%. With all its cash, it also is
able to handily pay its 3.8% yield. Slapping an 11 P/E on projected 2015
earnings of $3.70 gets us a price target of $41, or a 100% total return
including dividends. I believe Intel is a buy for regular accounts. I believe
Intel is a buy for retirement accounts. As of this writing, Lawrence Meyers did
not own a position in any of the aforementioned stocks.