Motley Fool: Turnaround in progress
Sun., Feb. 5, 2023
Computer processors giant Intel (Nasdaq: INTC) has been hanging out in Wall Street’s bargain bin for quite a while. Archrival Advanced Micro Devices is stealing market share in key markets, and Intel’s attempts to gain a foothold in mobile devices never gained traction. The past few leadership teams have not been up to the task of managing Intel’s formerly dominant market position – but it’s under new management now.
Current CEO Pat Gelsinger is an engineer at heart with decades of processor design experience. He has a deep understanding of what it takes to produce successful chips in Intel’s target markets, his leadership style earns industry-leading reviews from Intel’s workers and the company’s culture is turning back to rewarding innovation.
Ironing out kinks in the design and production process that earlier teams left behind is taking some time because of the semiconductor industry’s lengthy development pipelines and costly chip-making machinery. Gelsinger is now two years into his turnaround efforts, and investors should start seeing tangible results within a year or two.
Meanwhile, on multiple valuation measures, Intel’s stock is trading below its 10-year and five-year averages. On top of that, the stock was recently offering a fat dividend yield of 5.2%. Long-term investors might want to take a closer look at Intel. (The Motley Fool owns shares of and has recommended Intel stock and options.)
Ask the Fool
Q. What are “unrealized gains”? – N.H., Maryville, Tennessee
A. After you make an investment, it will often rise or fall in value, giving you a gain or loss. You “realize” the gain or loss when you sell it. Until then, it’s “unrealized.”
For example, if you bought 100 shares of Buzzy’s Broccoli Beer (ticker: BRRRP) for $2,000 and they’re now worth $3,000, you have an unrealized gain of $1,000. You might be sitting on huge unrealized gains from some great stocks, but until you actually sell the shares, you haven’t reaped, or realized, those gains – and they might shrink (or grow) by the time you sell them.
Unrealized gains are gains in theory only. Another term for them is “paper profits.”
Q. I’m thinking of selling a stock that pays no dividend and a stock that hasn’t grown much since I bought it last year. Would it be worth moving that money into CDs? – T.D., Philadelphia
A. Stocks are arguably the most profitable long-term investments for most people; certificates of deposit, known as CDs, with interest rates that have been very low for many years, have been best for shorter-term investments. But interest rates have risen recently, and some CDs are offering 4.5%. If you don’t think your stocks will do much better than that, do consider CDs.
But you might want to hold those stocks if the companies seem to be performing well, increasing their revenue and earnings over time. Dividends are terrific, but many great companies pay small or no dividends, especially if they’re reinvesting profits to further their growth. And lots of strong stocks will head south or be stagnant for a while – especially when the overall market experiences a downturn.
My dumbest investment
My worst investment? I would say poor timing. Like many who have written in, I have often sold too soon or held on for the wrong reasons. I have sold shares of Intuitive Surgical, Salesforce.com, Facebook (now Meta Platforms) and many others way before their time just because they stagnated for a while and I felt the urge to DO SOMETHING. Meanwhile, I inherited shares of another stock and I hung on too long out of affection for my grandfather. I guess my lessons are to hold forever if the reason you bought is still true, and not to hold a stock for sentimental reasons. – B.C., online
The Fool responds: Those are excellent lessons, learned from common mistakes. For best investing results, it’s important to learn to manage your emotions. Many people sell in a panic when the stock market drops or buy shares of hot stocks impulsively without considering whether they’re overvalued, or sell just because a stock has stalled and they’re impatient for gains.
A quote often attributed to super investor Warren Buffett says: “The trick is, when there is nothing to do, do nothing.” That’s hard to do, but if the company in which you’re invested is chugging along and not facing intractable problems, it’s often best to hang on for many years. Patience is another critical investing virtue.
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