intel

FEDEX CORP. $109.96, New York symbol FDX, earned $1.96 a share in its fourth fiscal quarter ended May 31, 2007, up 7.7% from $1.82 a year earlier. If you disregard a one-time gain from a contract settlement, earnings in the most recent quarter would have grown 4.4%, to $1.90 a share. Revenue rose 7.6%, to $9.15 billion from $8.5 billion, thanks to an acquisition at its trucking division and higher volumes and prices at its air transport businesses. The company recently started offering overnight delivery service in China, and the costs have hurt its earnings growth. But growing economic activity in China should help shield FedEx from a possible slowdown in the United States, and from higher fuel costs. FedEx is a buy....

ALLTEL CORP. $68.60, New York symbol AT, has accepted a $71.50-a-share takeover offer from private investors. The stock is trading below the offer price, which means the likelihood of a better offer is low. However, Alltel has no controlling stockholder, so a competing bid is possible. Alltel is now a hold. MICROSOFT CORP. $30.48, Nasdaq symbol MSFT, has agreed to pay $6 billion for aQuantive, Inc., a publicly traded firm that helps companies improve the effectiveness of their online advertising. Microsoft has roughly $28 billion (roughly $3.00 a share) in cash, so it can easily afford the purchase price....

INTEL CORP. $22 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.8 billion; Market cap: $127.6 billion; WSSF Rating: Above average) spends around 15% of its revenue of $6 a share on research, which has helped it launch several promising new computer chips in the past two years. The company now hopes to improve its share of the flash memory chip market. Manufacturers of mobile phone and digital cameras use flash chips to retain information without power. Intel now is working on a new type of flash chip that lasts longer, stores more information and uses less power. If successful, this process could eventually replace computer hard drives....

NASDAQ-100 TRUST SHARES $44.16 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers) or ‘Qubes’, hold the stocks that represent the Nasdaq-100 Index. This index is made up of the 100 largest and most heavily traded stocks on the Nasdaq Exchange. The index reflects firms across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. Expenses are about 0.20% of assets. The top 10 highest-weighted stocks are Apple Computer, Microsoft, Qualcomm, Google, Cisco, Intel, Gilead Sciences, Comcast, Oracle and eBay. Nasdaq-100 Trust Shares are a buy for aggressive investors only.

The best exchange-traded funds (ETFs) offer well-diversified, tax-efficient portfolios with very low management fees. Due to buyback and share issue arrangements, ETFs always trade close to their net asset value. Here are some of the best deals available in ETFs. We’ve also analysed one we don’t like. ISHARES CDN LARGECAP 60 INDEX FUND $76.72 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSE. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSE....

ADOBE SYSTEMS INC. $42 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 588.0 million; Market cap: $24.7 billion; WSSF Rating: Average) earned $0.30 a share in its first fiscal quarter ended March 2, 2007, down 6.3% from $0.32 a year earlier. These figures exclude costs related to the integration of Macromedia Inc. and other unusual items. Revenue fell 0.9%, to $649.4 million from $655.5 million. Customers are holding off upgrading their photo editing and design programs until Adobe releases new versions later this year. The company continues to spend over 20% of its revenue on research, so it’s more profitable than it looks. But at nearly 50 times earnings, the stock is vulnerable to bad news. Adobe also faces competition from freeware versions of some of its software....

North American stock markets could be sluggish or weak for a month or two as investors dwell on the possibility of a downturn in China’s economy, and the effect it would have on world economic growth. We think China’s economy is in reasonably good shape, but its stock market is showing clear signs of excessive speculation. It could go through additional one-day plunges that rattle investors and put downward pressure on North American stocks.

Now is a bad time for investing in Chinese or any emerging markets stocks. But if you have built an investment portfolio along the lines we recommend – well-established stocks, spread out across most if not all of the five main economic sectors – you should stick with it, rather than letting yourself be panicked into selling.

FEDERATED DEPARTMENT STORES INC. $44.25, New York symbol FD, earned $870 million or $1.66 a share from continuing operations in its fourth fiscal quarter ended February 3, 2007, up 35.1% from $644 million or $1.16 a share a year earlier. These figures exclude costs related to the integration of May Company stores and other unusual items. Sales fell 4.2%, to $9.2 billion from $9.6 billion due to the closure of about 80 stores. Same-store sales grew 6.1%.

The company plans to spend $4 billion on share buybacks in the next few months, which would cut the number of shares outstanding by 18%. If stockholders approve, it plans to change its name to “Macy’s Group Inc.” in June.

Federated Department Stores is a buy.

...

INTEL CORP. $20.82, Nasdaq symbol INTC, earned $0.26 a share in the fourth quarter of 2006, down 35.0% from $0.40 a year earlier. The company began expensing stock options in 2006, which cut its earnings in the most recent quarter by $0.04 a share. Restructuring costs also weighed on earnings in the latest quarter. Revenue fell 4.9%, to $9.7 billion from $10.2 billion, due to a price war with rival chipmaker Advanced Micro Devices. But Intel spent 17% of its 2006 revenue of $6.10 a share on research, so it’s more profitable than it looks. The company is phasing out older chips in favor of its more powerful dual-core and quad-core chips. But Intel is still ramping up production of these new products. The costs of running plants below full capacity cut its gross profit margin in the fourth quarter to 49.6% of revenue, from 61.8% a year earlier. Intel feels its margins will hover around 50% in 2007. The news spooked investors, and the stock fell roughly 7%. But Intel’s new chips should help it win back market share it lost to AMD in the past two years, particularly as next month’s release of the new Microsoft Windows Vista operating system spurs computer sales....

VERIGY LTD. $18 (Nasdaq symbol VRGY; Aggressive Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Speculative) makes automated equipment that tests the performance of computer chips. This equipment helps Intel Corp., Freescale Semiconductor Inc. and other chipmakers speed up production, and cut costs. Chip testing gear accounts for 75% of Verigy’s revenue. The remaining 25% comes from maintenance and other services. Verigy has its headquarters in Singapore, since customers in Asia account for nearly two-thirds of its revenue. It aims to focus on designing equipment, and is in the process of contracting out most of its manufacturing operations. The company was a wholly owned subsidiary of Agilent Technologies Inc. until June 2006 when Agilent sold 15% of its Verigy stock to the public at $15.00 a share. In October, Agilent handed out its remaining Verigy shares to its own stockholders....

When investing in techs, it’s essential to remember that these companies operate in the Manufacturing & Industry sector of the economy. They can put on extraordinary growth in the right conditions. But when the economy stumbles or a company falls behind the competition, you can expect deep market setbacks, especially when a stock is coming out of a period of over-valuation. That’s what happened to Intel, the world’s top maker of computer chips. Its earnings rose 15-fold between 1990 and 2000, but its stock rose 75-fold. At its 2000 peak, it was trading at 50 times earnings. Since then, its stock price has come down to much more attractive levels in relation to earnings, and earnings seem ready to set off on a new surge. INTEL CORP. $21 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Above average) is the world’s largest maker of computer chips, with roughly 75% of the world market. Computer makers Dell and Hewlett-Packard account for about 35% of its total revenue....