Chipzilla down but has always rebounded

Shares of semiconductor giant Intel (Nasdaq: INTC) 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 (P/E) ratio around 7.6 (compared to 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

Q. Where might I look up a company’s stock splits? – J.P., St. George, Utah

A. 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.

Q. 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? – Y.G., Homewood, Alabama

A. 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.

My dumbest investment

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. – K.K., online

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.