The Return of Intel
Intel should regain its throne atop the tech world, Cramer said.
A big cheerleader for the stock during the ‘90s, Cramer lost confidence in Intel in 2000 as it became more and more overvalued and vulnerable to rival Advanced Micro Devices. But with tech as whole set for its seasonal bull market and Intel outperforming AMD, it looks like the tide is turning again.
Intel is flush with cash, it’s buying back stock and Cramer said it’s making a killing off the securities industry, which uses servers with the company’s chips to process the massive volume of trades taking place each day. This alone could lead to an upside surprise, he said.
The stock isn’t that expensive either. Intel’s trailing price-to-earnings multiple is under 30, which is its historical average, and Cramer doubts it trails for much longer.
Intel sells at about 21 times next year’s earnings on a 12% growth rate. Cramer thinks the growth rate is accelerating, so that PE is better than it looks.
So while there was a time when tech stocks were the first to get hit during a downturn, now companies like Intel hold vast stores of cash, which keeps them out of the credit mess the market finds it self in now. And they put that cash to work doing buybacks to buoy their stocks during hard times.
“Tech: safe, seasonally right,” Cramer said. He recommends Intel before it makes its climb back to the top.
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