If I had to pick one (as time doesn’t allow me to review them all), I would probably ask what your timeframe is. If it’s five years or so, the pick is going to be Intel – which over the past decade or so is actually the worst-performing stock by far of the six companies just named.
But Intel is remarkable in that it probably has the deepest of all the franchises, plus fantastic cash flow, plus steadily rising dividends and share repurchases. Indeed, the stock’s yield is approaching 4 percent. But growth has been limited by one of the few remaining vestiges of technological improvement: miniaturization. We continue to fit ever more transistors in ever-smaller spaces. For Intel, this means the average selling price (ASP) of products has been going down steadily – for almost 30 years. On one hand, this has allowed Intel to totally solidify its franchise by virtue of its capital base and massive and efficient manufacturing.
One of these days, however – and this is why I emphasize the need for a long-term perspective here – ASPs are going to stop falling and may even begin rising. I’m not going to talk about all the economic implications of this process, but only the consequences for Intel shares, which for at least several years will be utterly sensational. You will see one of the biggest companies around probably growing at a rate in excess of 30 percent a year, for perhaps five years. (This assumes, of course, that we still have a world economy when it happens.)
Under those nearly certain conditions, but very uncertain timeframe, we think the yield on Intel is extremely adequate payment for what could admittedly be a long wait, but one that will pay off explosively.