Odd title for an article, but important for us as investors. We all make buy and sell decisions. Hopefully we do this infrequently and with a strong thesis, but we make decisions. We want to feel confident that we are making good decisions. After all, this is our hard-earned money at stake.
I mentioned in a post on selling stocks about how I was haunted by a decision to sell Intel. As the days go by, I’m less and less haunted and moving towards happy…but it took a while, and we’re not done yet. Let’s take a look at what happened.
What Happened?
In January of 2022, I started thinking about the chip shortage and it got me looking at chip stocks. I looked at Broadcom (AVGO), Nvidia (NVDA), Intel (INTC), and Taiwan Semiconductor (TSM). They’re 4 very different companies and after some research, I decided to invest in all 4.
I had a squishy feeling about Intel because it had a pretty strong history of under performance and its best days seemed to be behind it. At the time, I was also trying to slowly reduce my growth stock allocation and move some capital towards income stocks. Intel had a 5% dividend so I had that to fall back on. I included Intel in the group. I bought in mid-January through early February 2022.
Timing is Everything
Take a look at the stock price chart for Intel, Broadcom and Taiwan Semiconductor. I left out Nvidia, because it’s stock skyrocketed and it is hard to see the others by comparison.
First thing to note is that the group of 3 stocks all did poorly right after I bought (as did Nvidia). In fact, a year out, the group had underperformed. This is when you start to ask yourself “Am I an idiot?” I did some research, but did I miss something?
In my experience, I am rarely proven right quickly. In most cases, my biggest winners dropped after buying – I’m not sure why, I think it’s a test. Anyway, I held on with TSM, NVDA and AVGO, but INTC and I parted ways in February 2023.
February 2023
Intel had cut its dividend. Remember I was squishy on Intel but convinced myself because of the dividend. With the dividend cut, I no longer had a strong case to hold on. I agonized a bit, read some more, remembered my initial assessment that its best days were behind, and I sold.
Immediately the stock price went on a tear. Let’s zoom in and take a look.
It goes up for a bit and starting this year, it turns down.
What’s worse is that during the time Intel was going up, it’s a media darling. Every story I read was about how Intel would benefit from the CHIPS Act and it would be a leader in bringing tech jobs home. You’re killing me. Earlier this year, I wrote a post where I referred to my being haunted by that sale.
…And Now?
Today I feel vindicated. This morning The Motley Fool, one of my favorite sites, wrote Intel Just Revealed Why It Can’t Split From Its Manufacturing Model and Why the Stock Is a Hold at Best. Read here.
The article talks about steep losses in the manufacturing business. The author poses the question of whether the CHIPS act money is funding or a bailout. That’s harsh.
Wrap-Up
Aside from the joy of being able to gloat a bit today, what did we learn? For me, it is important to analyze my company investments and sales and look back at my thesis for both to understand what I’m doing right, and what needs some work.
My exact quote was: “I’m still haunted by a sell of Intel corp that I made last year. It had been steadily declining in price and management had been making excuses on earnings calls. When they cut their dividend, that was the last straw and I sold all my shares. That was 1 year ago. Intel is up over 55% since.” Read here.
Management was making excuses. For a while, it seemed that many investors ignored this. Dividend cuts are not a good sign. Sometimes a strong company needs to cut its dividend – companies like Disney and Texas Roadhouse have done this and have come back strong, but companies should be on a short-leash when they do this.
I feel vindicated because I’m investing my money. I worked hard for it and while I won’t always be right, I want to be sure I am making rational and well-thought out decisions of what to invest in and when to pull my capital out.
The story is never over. That’s the hard part. Maybe Intel goes on to be a market beater in the next 10 years. Who knows? But knowing that the author of that post is seeing what I saw and the price has declined because others are seeing issues makes me feel as if maybe I’m not an idiot.
Thanks for reading. Let me know what you think.