Buffett’s INTC buy
Institutional money managers are required to disclose their equity portfolio holdings to the SEC each quarter in a filing called a 13F. (The 13F is not to be confused with the 13D, a filing the SEC requires ten days after anyone not an institutional investor acquires a 5% of any class of securities (equity or debt) of a public company).
In its 13F filing for the December 1011 quarter, Berkshire Hathaway indicated that it had bought 11.5 million shares of INTC, worth over a quarter billion dollars, during the period.
In its just-released March 2012 13F, the company says it held only 7.7 million INTC shares at the end of the quarter–meaning it sold a third of its holding in the interim. As thestreet.com points out, Buffett added roughly the same dollar amount to his holding in IBM.
What’s going on? Should we follow the Buffett lead?
my thoughts on the recent selling
1. Mr. Buffett makes no secret of the fact he feels he doesn’t have a deep understanding of technology nor is he comfortable with large tech holdings. He likes financials like GEICO, instead. IBM, a steady grower that sells a branded set of services on a recurring subscription basis through a large sales force, is much more his style.
2. My guess is that, at least implicitly, Buffett has put a dollar size limit on the INTC position because it’s in an industry he’s not an expert in. He’s trimming to keep the position from getting too big.
3. Coming at INTC from a slightly different angle, the company is a turnaround story. To me, at $20 a share, the stock was so cheap that it didn’t matter too much whether the company’s efforts to reinvent the PC ( or at least clone the Macbook Air) and crack the mobile market will be successful. At $30 a share, in contrast, it seems to me that a buyer/holder is betting that ultrabooks are a hit and that designing bespoke cellphones for carriers will work, as well.
I feel no strong urge to buy at today’s level, but I’m content to wait and see what happens. Mr. Buffett seems to me to be acting in line with my general analysis. He wants to continue to make the positive bet–or else he would have sold everything–just not a big one.
4. Stock picking is like baseball, in that it’s the season’s average that counts, not a given at bat. Even the most successful professional equity managers are wrong at least 40% of the time (the industry cliché is that 55% right/45% wrong = genius, the reverse proportions = unemployed). So riding on anyone’s coattails on a single decision is a risky position. Think: Albert Pujols.
the INTC dividend increase
On May 7th, INTC announced its board of directors had upped the quarterly dividend to $.225 from $.21.
I’m pleasantly surprised. This is the fourth boost to the payout in less than three years. My picture has been that 2012 would be a flattish year, before a reacceleration earnings during 2013. I thought the company might wait until November or December to decide on a dividend increase. That’s because dividend decisions are never made in anticipation of future profits. They’re always backward-looking. They’re made based on what earnings already booked will support.
I take the board action as an indication INTC’s current business is going better than I’d anticipated.