Investing in Intel is Like Investing in Yourself

As the 5-year chart below dramatically illustrates, the price of Intel shares have gone the same direction as their levels of free cash flow. INTC Free Cash Flow data by YCharts

There's no mistaking that Intel's free cash flow appears to have fallen off a cliff. But as of the end of the first quarter 0f 2012 they still had almost $6.4 billion of levered free cash flow (trailing 12-months) and close to $20 billion of operating cash flow.

Next Tuesday, July 17, is when we'll learn the cold, hard facts about the second-quarter 2012 earnings results for the company.

Second-quarter revenues are anticipated to be around $13.6 billion compared to $13.03 billion for the same quarter last year.

Earnings per share have been guided down to 53 cents a share, a penny below last year's second-quarter results. INTC has met or exceeded earnings expectations for four quarters in a row.

So here's an investment approach that doesn't pretend we have a crystal ball telling us what Intel will say this coming Tuesday: If you want to own some shares, consider buying half the number of shares you desire between now and Tuesday.

The $24.68 low of Thursday, July 12, is a more respectable entry-level price than we have seen in a long time. Then buy your second allotment of shares after INTC makes their second-quarter-earnings announcement and gives guidance for the third quarter 2012.

If they meet or barely exceed the analysts expectations for the second quarter, the stock might just test the Nov. 25 intraday low of $22.51.

It wouldn't surprise me if they also announce an increase in their quarterly dividend, since their current payout ratio is a sustainable 34%. That might help protect the share price on the downside.

We're at that emotionally charged time of the year when stocks are being pressured and the news seems mostly negative. It's a good chance to buy great companies like Intel at reasonable prices.

Remember "Growth at a Reasonable Price" -- a.k.a. GARP? That's what we expect from ourselves year after year. How nice to have the chance to experience GARP with Intel, at least for now.