Bargains to Be Had on Weakness
After listening to the Intel (INTC) conference call, my thoughts haven't changed materially about the McAfee (MFE) deal, or where I'd add to my Intel position ¿ at $18-18.50.
Management did a great job explaining why it sought out MFE: With the rapid growth of the internet (40% CAGR), smartphones and PCs and the increased frequency of cyber- attacks, the need for security is critical. MFE's performance has been impressive, with double-digit revenue growth and 80% gross margins over the last number of years. It has 200 million users worldwide, its clients are both individuals and enterprises, and it has a complete product offering in endpoint- and cloud-security functionality.
There will be opportunities to blend hardware, software and services to better compete and win new business, particularly in the cloud arena and at a higher profitability level. But questions will remain (and are likely to be an overhang on the stock near term) on the price Intel paid (4x revenues), execution and whether or not Intel's base business has peaked.
Separately, I will use the weakness in the market (on the back of the disappointing economic news ¿ initial jobless claims at a nine-month high and a weaker Philadelphia Fed index) to add 100 shares of Vale (VALE) at $28.68. If General Mills (GIS) falls closer to $34, Abbott (ABT) gets to $48, Boeing (BA) nears $63, or Prudential (PRU) goes to $51, I will likely pick up more of those as well. Again, I'm looking to stay diversified with high-quality stocks.
After my trade, I will own 800 shares of Vale, corresponding to 0.80% of the portfolio.
Regards,
Jim Cramer
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DISCLOSURE: At the time of publication, Cramer was long INTC VALE GIS ABT BA and PRU.