-=Trader Wizard Ezine - October 31, 2004=-



	Trader Wizard Perspective Daily global capital markets advice "Blog" posted before the NYSE morning bell and throughout the trading day.

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	Week 42 In Review Canaccord Capital (TSE: CCI) Alamos Gold (TSE: AGI) TW’s Daily Show: Oct 29 Forex Trading, Dollar Worries This Week at Boeing This Week in Gold The Need for M&A Time to Buy Newmont Is SEC Watching GOOG?

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BUY or SELL Recommendation on Intel
	Intel Corp (NDQ: INTC) Oct 29 close: $22.26 RECOMMENDATION: ACCUMULATE Strategy: Write NQ=MD January 2005 Puts Strike@20.00 Price at the market close October 29 (NQ=MD Jan-05 close @ $0.50) OneChicago Single Stock Futures (INTC1C): INTC1C Z4 (Dec 04) $22.24 Among general reading, here is material I used to make this decision: EasyStock Interactive charts: Monthly, Weekly, Daily, Hourly, 30-Minute data, the Reuters data at Yahoo Finance, and the Value Line report.

The case for accumulating (the stock):
	1. The stock is fairly priced today, but is well positioned for the next three years as the global economy recovers. My EPS and PE estimates for INTC are $1.10/20 (2004), $1.20/22 (2005), $1.60/24 (2006) and $1.90/25 (2007). With my accumulation target of $20 on INTC (which is enhanced and possibly enabled by writing puts), my price targets are $26.40 (+32%) by year-end 2005; $38.40 (+92%) by year-end 2006; and $47.50 (++137.5%) by year-end 2007. These estimates are based on normal growth; however, I foresee Intel will also grow relatively quickly via acquisitions, which could increase these projections. 2. The corporation is financially stronger than any other in the Dow 30 (after MSFT pays out its huge cash dividend). It’s Current Ratio (3.3), Quick Ratio i.e., acid test (2.8), and Liquidity Ratio i.e., cash (2.35), are the best in the Dow. 3. The Debt Ratio at 19.7 is also the Dow 30’s best and compares to IBM at 73.3 and BA at 84.7. Interest coverage is 121.0, which is by far the highest in the Dow 30, and compares to a chillingly low 1.7 for BA. 4. Altman’s Z-score Ratio, which is another solvency test, is at 10.9 versus 2.62 for IBM and 2.34 for HPQ (comfortably over the 1.80 test). Compare this to GE at 0.74 and BA at 1.65 and you begin to see which companies are going to suffer relatively more if, as and when interest rates increase. 5. In a rising interest-rate environment, which I expect now that the election is out of the way, the financially weakest companies will seek mergers or takeovers, whereas the strongest, like Intel, will pick up some great bargains. In the semi-conductor industry, I expect there will be a significant round of consolidation in the next year, and that Intel will be a major player. 6. Short-term technical indicators have turned north, which in the next month or two will take the long-term (monthly data) indicators pointing upward as well. Technically, INTC is in an accumulation zone.

The case against accumulating (the stock):
	1. A post-election decline in the broad market would likely be based on a weak U.S. Jobs Report (Nov. 5), which would be an indication of further economic weakness, which would lead to a further sell-off of semi-conductor stocks, including Intel.

Trader Wizard's expectation for this trade:
	1. The NQ=MD INTC 20 puts will almost certainly not be exercised as that would require the stock to fall 10.2 percent in the next 50 days, and would require a 17-month low whereas the stock is trading strongly at 3.5% above its 13-day and 50-day EMA. But, there may be post-election weakness in the broad market and I am not yet ready to aggressively buy the stock (or buy the calls). So, I expect to earn the $0.50 premium, which is the sole expectation for this trade. If the stock moves down to $20-$21.00, I would begin to buy the stock. Should I ever see a downward price spike in the stock to $20 or less, I will switch my recommendation to an outright BUY, and would recommend the aggressive purchase of calls at that time. 2. More than anything this week, I wanted to focus investors on the need to look at the financial strength of companies. In order to save the (trade-weighted) U.S. Dollar from an even greater collapse, the Fed must start to move interest rates higher (despite their words to the contrary), which will be accomplished by tighter monetary policy (which is possible now that the election will be over Tuesday). Financially weak companies will suffer from higher rates.

Trader Wizard Profit & Loss:
	The ‘Trader Wizard buy or sell’ Ezine intends to present a P&L for individual trades. In the Daily Blog, I have been showing readers just how profitable these trades have been.

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