Elaine Stokes isn't your typical Intel stockholder: She co-manages two Loomis Sayles bond funds. Yet those funds are now two of the largest owners of Intel stock. Says Stokes: "It's getting hard to make a case for sitting in a bond with low rates and no upside when you can own an equity with upside that actually offers a better yield."
Stokes is on to something. Intel should generate $11 billion in free cash flow in 2012 -- a lot of ammo for dividends and buybacks. And as Credit Suisse analyst John Pitzer puts it, "Massive demand for transistors plus the world's best manufacturer of transistors equals a compelling investment." PC sales are actually thriving globally -- China and Brazil are particularly hot -- helping propel a 25% increase in third-quarter earnings. Though Intel fell behind rival ARM in chips for smartphones and tablets, it's still cashing in on mobile computing as those devices stoke demand for cloud-computing servers powered by Intel chips (which boast 48% margins). Barclays expects those sales to increase 7% next year. That means healthy potential for a stock trading at nine times earnings.
Markets up. Markets down. Turmoil in Europe. You can't even trust bonds. What's an investor to do? Our man's solution: simple and boring.
