Are you concerned that you, American Taxpayer, own a piece of chip stock Intel (INTC)? There are certainly some who are, but one person who seems very much unconcerned is President Donald Trump, who is looking to make a few more deals just like this. That is not sitting well with Intel shareholders, either, as Intel shares slid modestly in Monday afternoon’s trading.
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Not long after President Trump’s second election, he advanced the idea that the United States should have a “sovereign wealth fund.” For those not familiar, a sovereign wealth fund is, generally speaking, a taxpayer-funded fund which uses “foreign exchange assets” to invest in corporations, buy bonds, or similar matter. There is no “generally agreed upon definition of an SWF,” noted the Chicago Federal Reserve.
And the Intel deal may represent a starting point for future deals that will ultimately make up the sovereign wealth fund in question. Trump declared that he “…will make deals like that for our Country all day long.” He followed that up with, “More jobs for America!!! Who would not want to make deals like that?”
Bad Idea, Says the Wall Street Journal
The Wall Street Journal would not, apparently. While it does agree that making Intel competitive again should indeed be a “national priority,” the how of it is what is at stake. The government taking equity does not really solve the problem, the Journal noted, because Intel already could get cash from the private market as it was. The government’s stake, at last report, is tied for the sixth-largest, along with an investment from SoftBank (SFTBY).
The approach also muddies some waters that Washington may rather not have muddied. We know that share prices often increase following job cuts. Will Washington want to look like it is profiting from those cuts? How about policy decisions? Will those be made as shareholders or as public servants? While some may not find these issues pressing, these are things that might cost elections later on.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 23.2% rally in its share price over the past year, the average INTC price target of $22.34 per share implies 9.22% downside risk.
