As I Screen for Value Stocks, Intel Becomes an Even Bigger Bargain Than Before

The ranks of the names meeting my modified Benjamin Graham “Stocks for the Defensive Investor” criteria continue to grow. Ten weeks ago, there were 10, a significant number in its own right. Now there are 13. It is not easy to make the cut, given the rather stringent criteria:

• Adequate size. A company must have at least $500 million in sales on a trailing 12-month basis. (Graham used a $100 million minimum and at least $50 million in total assets.)
• Strong financial condition. A company must have a current ratio (current assets divided by current liabilities) of at least 2.0. It also must have less long-term debt than working capital.
• Earnings stability. A business must have had positive earnings for the past seven years. (Graham used a 10-year minimum.)
• Dividend record. The company must have paid a dividend for the past seven years. (Graham required 20 years.)
• Earnings growth. Earnings must have expanded by at least 3% compounded annually over the past seven years. (Graham mandated a one-third gain in earnings per share over the latest 10 years.)
• Moderate price-to-earnings (P/E) ratio. A stock must have had a 15 or lower average P/E over the past three years.
• Moderate ratio of price to assets. The price-to-earnings ratio times the price-to-book value ratio must be less than 22.5.
• No utilities or retailers

The biggest surprise remains Intel (INTC) , which I believe is the largest name that has graced the list since I began running this screen many years ago. Since my May column on Intel, INTC has fallen another 11% and trades at 14.5x and 12x 2023 and 2024 consensus earnings estimates, respectively, while yielding 3.7%.

Winnebago Industries (WGO) is also a holdover from May. After dipping from $56 to $44 between mid and late May, shares have recovered to the $59 level. Winnebago now trades at about 9x and 6.5x 2023 and 2024 consensus estimates, respectively.

The other eight from May are Johnson Outdoors (JOUT) , Reliance Steel (RS) , Commercial Metals (CMC) , Encore Wire (WIRE) , Preformed Line Products (PLPC) , Superior Group (SGC) , Mueller Industries (MLI) and Amcom Distributing (DIT) .

Newcomers include Sturm, Ruger & Co. (RGR) , Evercore Inc. (EVR) and Nucor Corp. (NUE) . RGR is currently trading at 11.5x 2023 consensus earnings estimates and yields 5.28% (based on trailing dividends as the dividend is not consistent; last quarter it was 68 cents, which implies an indicated yield of 4.3%). EVR trades at 11.5x and 12x 2023 and 2024 consensus earnings estimates, respectively, and yields 2.88%. NUE, which is a repeat offender from years past, trades at 12x and 10x 2023 and 2024 consensus earnings estimates, respectively, and yields 1.7%.

It is somewhat unbelievable to me that Intel still makes the cut and is even cheaper than it was in May.