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Dow Jones S&P 500 NASDAQ 10-Year Note
10,337.05 1,095.94 2,183.73 34.23
Oil *
72.45
UP
51.08
UP
4.01
UP
10.74
UP
0.31
10 Yr
3.42%
SPDR Gold
110.84
+0.50%
+0.37%
+0.49%
+0.91%
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Commentary: Wrong! Tactics and Strategies
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Valuing the SOX: Intel
By James J. Cramer

3/13/01 11:42 AM ET


Read More
Click here for the latest from James J. Cramer.
Editor's note: This is the second installment of a multipart series on semiconductor stocks. Please check out Part 1 (the introduction to the series)!

Related Stories
*Extra* Daily Interview: The Intel Fallout
'One Step Backward for Intel ... One Giant Fall for the Fund World'
The Upshot: Intel Finds Honesty Such a Lonely Word
With Sales Hurting and Few Signs of a Pickup, There's Little Intel Upside
The Preannouncement Playbook
Intel (INTC:Nasdaq - news - boards). It has already preannounced a bad quarter. It has already sharply lowered growth. It has already said that it has problems in the communications-chip sector, where things have gone from good to horrid in the time it takes for a lynx to snare a snowshoe hare. But it would appear that the consumer side, the personal computer business, could be stabilizing. And we are only a few months away from a massive new product cycle that will kick in and help the semiconductor giant.

Here's the problem. If the consumer downticks, then Intel can go appreciably lower still because the communications stuff is just plain nasty. If the consumer stays the same, then Intel is just kind of interesting. No more than that. Look at how it stacks up historically.

P/E Data Ranked Over Time
Intel (INTC)
RANK DATE P/E ***
Lowest P/E 1 10/7/94 10.37
2 3/8/96 13.24
3 7/19/96 17.20
4 3/12/01 18.38 Yesterday!
5 1/9/98 18.52
6 6/13/97 20.74
Highest P/E 7 10/9/98 25.09
8 2/26/99 33.88
The list is sorted from lowest P/E to highest, with yesterday's P/E highlighted,
This is not a particularly risk-free moment in the cycle of Intel. It is not so "cheap" that we can safely say that it has always bottomed here. Why not jump the gun? Because in a correction this severe, many of the funds that are long Intel may be forced to sell it simply to raise cash. We have to wait for the ideal entry point.

Intel, unlike a lot of other tech at this point, may actually be too late to sell, given that I see six to seven points of downside if the consumer slows here. That actually may not be enough to sidestep if you have owned it a long time.

Even now, as I write the words, I feel that I will be lulled into the trap that I set for myself with EMC (EMC:NYSE - news - boards) -- where I put embraced it, thinking that I would be able to average down when I thought it had bottomed. It has now dropped in half while I've been waiting for that entry point. So, by all means, if you can, please sell a little Intel to be able to buy it back lower if you can't handle a 30% decline from these levels.

Ideal Entry and Exits on the SOX Index
Overlayed on Intel's P/E and Price
Source: Bloomberg

SOX Index
Intel (INTC)
Date Index Price P/E Ratio Price to Sales
Currently, this is where we are this week. On 3/12/01 the SOX is at 576.38 and Intel is at: $27.75 18.38 5.54
A great Exit on the weekly SOX chart would have been 3/10/00 when the Index was at 1332.73 At the time, Intel was at: 60.09 52.03 13.60
A great Entry on the weekly SOX chart would have been 2/26/99 when the Index was at 356.26 At the time, Intel was at: 29.98 33.88 7.61
A great Exit on the weekly SOX chart would have been 1/29/99 when the Index was at 420.45 At the time, Intel was at: 35.23 39.81 8.95
A great Entry on the weekly SOX chart would have been 10/9/98 when the Index was at 200.8 At the time, Intel was at: 20.95 25.09 5.53
A great Exit on the weekly SOX chart would have been 2/27/98 when the Index was at 316.43 At the time, Intel was at: 22.42 23.12 5.85
A great Entry on the weekly SOX chart would have been 1/9/98 when the Index was at 248.9 At the time, Intel was at: 17.97 18.52 4.69
A great Exit on the weekly SOX chart would have been 8/22/97 when the Index was at 391.62 At the time, Intel was at: 24.05 25.18 6.57
A great Entry on the weekly SOX chart would have been 6/13/97 when the Index was at 294.86 At the time, Intel was at: 18.09 20.74 5.25
A great Exit on the weekly SOX chart would have been 1/31/97 when the Index was at 288.73 At the time, Intel was at: 20.28 27.97 6.41
A great Entry on the weekly SOX chart would have been 7/19/96 when the Index was at 152.71 At the time, Intel was at: 9.09 17.20 3.45
A great Exit on the weekly SOX chart would have been 5/17/96 when the Index was at 212.57 At the time, Intel was at: 8.89 17.61 3.58
A great Entry on the weekly SOX chart would have been 3/8/96 when the Index was at 172.71 At the time, Intel was at: 6.69 13.24 2.92
A great Exit on the weekly SOX chart would have been 8/18/95 when the Index was at 293.79 At the time, Intel was at: 8.11 20.27 4.19
A great Entry on the weekly SOX chart would have been 10/7/94 when the Index was at 122.72 At the time, Intel was at: 3.71 10.37 2.44
*The determination of these dates and prices were made by identifying optimum entry and exit points on an historical graph of the SOX using weekly closing prices.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to jjcletters@thestreet.com.
Send letters to the editor to letters@realmoney.com.
Read our conflicts and disclosure policy.
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Dow Jones S&P 500 NASDAQ 10-Year Note
10,337.05 1,095.94 2,183.73 34.23
Oil *
72.45
UP
51.08
UP
4.01
UP
10.74
UP
0.31
10 Yr
3.42%
SPDR Gold
110.84
+0.50%
+0.37%
+0.49%
+0.91%
Data delayed 20 minutes