Thursday, November 1, 2012


I wish I didn't have to do this but surely someone who reads this and decides that what I say makes sense will invest money, lose it all, and claim that I am somehow responsible.  I'm not, be an adult, take responsibility for your own decisions.  Taking investment advice from a 24 year old is idiotic, especially if you put more money into the idea than the 24 year old did. (I really don't have all that much).  In fact, none of this is advice, I'm just talking about what I'm doing in my diary.  The fact that I let you read it doesn't mean that you should do anything I say, or anything you think I said.  I'm long Intel and I could be very wrong.

(I'm hoping that this counts enough for anyone who decides they want to sue me.  Please don't.  That'd make it really hard to get to a million in the next year or so.)

Most of the money that I've saved I've invested in stocks. Much of this has gone to my Roth IRA.  Last year I built up a significant position in Intel.  Then the market kind of ran away and I put money into some of my other ideas that were giving what I considered to be better value at the time.  Since then, Intel has gone down tremendously (as of this writing we're down 25% from the high).  I could not be more excited about this.  Since it dropped I've doubled my position in Intel, and bought about $400 worth of long duration out of the money calls.  I try to keep the amount of speculation in my portfolio below 10%.  Calls of this sort are extremely risky and not for--well really anybody.  It is basically a form of gambling that is slightly +EV as opposed to roulette which is slightly -EV.

Intel yields over 4% and just generates a ton of cashflow.  Its really a straightforward thesis.  Assuming that the underlying business continues to plug along fine, does anyone really think its realistic that Intel is going to move to a P/E of 8-6?  It just doesn't make any sense to me.  Intel could go lower certainly, but I think there is a lot of safety here. Now if the business starts to preform worse, that could be a problem. Guidance for 4th quarter is low, but that's already baked in.  (Intel lost a good deal on the 3rd quarter earnings report.  They beat expectations on the top and bottom but issued lower guidance.)  You aren't going to make any money betting that Intel will do what its expected to.  The only issue is how much worse can it get?

Intel has cast a lot of lines.  If the PC market rebounds Intel will do really well and the stock price will soar.  If their mobile chipset starts to gain some traction Intel will do moderately well but the stock price will soar. (People couldn't be more mobile focused if they had wheels instead of legs.)  If the cloud gets bigger (this is a virtual certainty) and Intel can maintain its market share in the server market (This is perhaps less certain), Intel will do really well.  Maybe I'm wrong, maybe everything just starts going wrong.  But I think its uncertainty about Intel's future keeping the stock price down.  Intel didn't just wake up one day as market leader, they got there by being the best.  Economy of scale is huge when R&D costs are significant and Intel has a massive pile of cash.  They can hire the best engineers.  They can challenge every corner of the market.  They are vertically integrated, to my knowledge being the only chipset company that owns its fabs.

Long Intel.

I'm not an Investment Advisor of any sort, registered or otherwise.  Any advice you take from me is probably wrong, so don't take it.  Your job as an investor is to pull the companies financials and look at the facts, not listen to some idiot on the internet.  I would say this was provided for entertainment purposes if I thought it was entertaining.  This is provided over the internet because I haven't figured out how to make you stop reading it yet.  Don't. Take. My. Advice. (The previous word was not intended to mean that anything I say is "advice.")  (Just please don't sue me).

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