Hedge funds typically have a reputation for being tight-lipped about their investing moves, rarely offering much insight to retail investors. However, once every quarter, institutional money managers are required to file a form 13F with the Securities and Exchange Commission (SEC) -- a document that essentially outlines all of the stocks their funds bought or sold during the previous quarter, and their holdings at the end of it.
Citadel Advisors, run by billionaire investor Ken Griffin, is one of the most prestigious hedge funds on Wall Street, and while reviewing the 13F it filed on Nov. 14, I noticed something. In the third quarter, the fund increased its stake by 172% in a semiconductor stock that isn't Nvidia.
Should retail investors follow Griffin's lead, or would they be better off staying on the sidelines?
Citadel just made a pretty big statement
During the third quarter, Citadel significantly increased its position in Intel (INTC +0.00%). The table below illustrates Citadel's stakes in Intel as of the ends of the last five quarters.
| Metric | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|---|---|---|---|---|---|
| Intel shares owned (in millions) | 3.8 | 3.7 | 5.4 | 6.8 | 18.5 |
Data source: Hedge Follow
As the data above shows, Citadel has been scooping up the chipmaker's shares during the last three quarters. What's curious, however, is the company's purchase of 11.7 million shares over the last three months, nearly tripling its stake.
NASDAQ: INTC
Key Data Points
Why might Citadel be bullish on Intel?
It's well-known that one of President-elect Donald Trump's primary campaign themes was his support for investing more into American-made products and domestic manufacturing. That said, Trump hasn't exactly endorsed President Biden's CHIPS Act -- which will put $280 billion worth of government support behind growing the country's semiconductor manufacturing capacity -- with a glowing review.
Nevertheless, I personally don't think Trump will try to change the CHIPS Act too much after he assumes office in January. At the end of the day, the CHIPS Act is doing precisely what Trump wants -- incentivizing semiconductor businesses to expand their manufacturing capabilities in the U.S.
And perhaps no other U.S.-based chipmaker has benefited from the CHIPS Act more than Intel. In my opinion, Intel is also well positioned to receive even more business from the federal government over the next four years.
Image Source: Getty Images
Is Intel stock a buy right now?
As of the time of this writing, shares of Intel are down by more than 50% this year. I tend to see the narrative surrounding Intel as being "one step forward, two steps backward." Over the last several years, the company has lost significant market share to competitors, and it hasn't exactly been impressing potential partners with its foundry process. Most recently, Intel was replaced in the Dow Jones Industrial Average by Nvidia.
Against the backdrop of its operational stumbles, the chip giant has implemented a number of cost-reduction efforts (namely layoffs), and there were even reports swirling a couple of months ago that Intel could be acquired. None of these factors point to it being a particularly enticing investment prospect.
So, why would Griffin double down on Intel stock when there are other more prudent opportunities?
My suspicion is that Griffin thinks Intel stock may have bottomed. And now that Trump is headed back to Washington, I'd say there is a good chance that he'll follow in his predecessor's footsteps by awarding more business to Intel in an effort to help it reignite its growth. If that's the case, Intel stock could be poised for a nice bounce-back over the next year.
With all this said, Intel is still very much in a turnaround phase, and it's by no means a screaming buy. If the stock does shift into higher gear, it will likely do so based on a narrative of a comeback as opposed to a notable near-term improvement in its operating results. For these reasons, I honestly would not be surprised if Citadel flips much of its Intel stock for a quick profit rather than holding the shares for the long run.
At the end of the day, the chipmaker's outlook remains pretty speculative. I'd still pass on Intel for now.
