Post of the Day
March 30, 2000
Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light.
On FUD and Folly
There are four questions a potential investor must ask himself/herself before the begin if they ever hope to be successful in the long term:
1. What is my time frame? 6 months, 1 year, 5 years, 30 years etc.
2. What is my risk tolerance? An honest answer is critical. The answer might have a lot to do with your frame.
3. What do I know? What don't I know? What do I need to learn?
4. What are your expected returns on your investments?
After you have answered those questions, you then need to take into consideration some basics.
1. Historically, the average return from stocks is 10.5% a year.
2. The "experts" are wrong a lot. Take Warren Buffet, for an example, the greatest investor who ever lived, even he only hits @5 out of 10. The trick is to make the most out of the winners while minimizing the damage from the losers. BRK has averaged a return of @27% for the last 30 years, which I think gives a pretty good benchmark to work with.
3. They're out to get you. The TV media, your brokerage firm, the financial press, are interested in traders and momentum players. Buy and hold investing is boring and it doesn't generate commission or advertising dollars. That's why they almost always emphasis point gain's over percentage gain's. If you remember the movie Trading Places with Eddie Murphy, one of the Duke brothers was explaining the brokerage business to Eddie Murphy's character "You see, it doesn't matter if our client makes money or loses money, the beautiful thing is WE always make money" to which Eddie replies "Oh, I see, you guys are like bookies".
4. There are two philosophies when buying a stock. Are you investing? Or are you speculating? When you invest in a stock you invest in management. When you speculate you're looking for price volatility.
5. The patient investor has the edge. If your understand the ebb's and flows of the market and don't panic buy or sell you'll always be in great shape. This is the edge the individual has over the institutions. Institutions are short term and very susceptible to panic buying and selling and they almost always overreact. An individual can use this to great advantage.
Now that I got that out of the way I'll try to relate that back to Intel.
Intel's price: IMHO no getting around it at 144 it's expensive. It's expensive relative to its growth rate (p/e over long term growth rate), and it's expensive relative to AMD. (Or is it AMD is cheap relative to INTC?). However it is not as expensive as TXN, CSCO, MSFT, JDSU, AMAT, ORCL and a whole host of other tech stocks. And more importantly being just being expensive is not a reason in itself for a stock to go down.
Intel's competition: The competition is getting better. They have come down off an unsustainable 90% market share a couple of years ago to 80 or 85%. AMD bulls feel they can get as much as 30% this year, which might be possible. However INTC is still very, very competitive. The INTC bashers can rant and rave all they want but I don't believe INTC will let them get that far ahead with any technological advances. 2 months ago the INTC bashers didn't think that they would be able to produce a 1 Gig chip when they did. Innovation is something that is inbred from the highest levels of the corporation. Intel's management is obsessed with innovating as is Applied Materials, Cisco's, and Oracle's is AMD's? But innovating is not enough, execution is the other half of the battle. I was in a marketing meeting the other day and we were talking about the need to continue to innovate, and the point was made that a shortage of good ideas is never problem, the hard part is making them a reality. I should note my company is known as being one of the most innovative in the banking industry. We also have heavy duty competition, the Citigroups, and Chases of the world, and we've still been able to post 36 consecutive quarters of 25% (+) earnings growth and by all accounts this quarter should be equally as solid. Innovation and Customer service are the two obsessions of our senior management and it permeates the entire organization.
The nattering nabobs of negativity: It's easy to be negative. It's easy to make the case that INTC is expensive and it's time to take profits and sit on the sidelines. Only, I convincingly could've have made those same arguments 80 points ago. Econodropout was making last fall. Camronj has been making them since at least December, their arguments were seemingly well researched and certainly well written, unfortunately for anyone who acted on them they were wrong. 60 points wrong for Cam and 80+ for Econo. That's real money. But according to them, its people like me don't have an open mind. INTC will go down sharply one day and no doubt the INTC bashers will be posting see I told you so. As they say even a stopped clock is right twice a day. It's hard to be a long term buy and hold investor. There is a big temptation to pull money off the table, the bears can be very convincing. This is where understanding your time frame, investing philosophy, expectations and risk tolerances to come in. INTC has so far exceeded my investment expectations it is not even funny. I can remember fantasizing what it could be worth in six years and 144 I thought would be very unrealistic, but here we are. Recently HolyRomanEmpire rehashed all of Cam's and Econo's INTC bashing from the last six months and received over 40 rec's. There was nothing new in it at all. It goes to show you the power of linking a negative INTC post on the AMD board.
This post will probably serve as the peak of INTC stock price for the next 2 years, if it does so be it I own other stocks that need to start picking up the slack anyway.
Good luck longs and shorts, I just hope I amused, educated and enriched.
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