Yesterday I sold all of my shares of Intel (INTC). From May 2009 through August 2011 I had accumulated 296 shares. At approximately 11:57am EST, on September 19, 2012, they were all gone.
That's just about enough drama for one article. No one died due to my actions, as far as I can tell. The reason for that storied history is because I love the company. From my investing standpoint Intel was great; it paid a good dividend, regularly increased it, and the stock price remained low. This last point was a bonus for me because I went in with no intention of selling, so the stable price meant I could increase my position for cheap. From a consumer standpoint, it was just as good. I still use a desktop PC at home, with no intention of permanently switching to a tablet and I work in an office where everyone uses a laptop that's replaced every four years. Despite all these positives, Intel released a statement on September 8th which made me seriously question the future of my investment.
If you've made it this far, you no doubt are aware of the news. In July of this year, Intel forecast Q3 revenue of $13.8 billion to $14.8 billion. On September 8th, low demand for PCs led them to revise their numbers, stating that they now expect revenue of $13.2 billion. This represents a 4% - 10% drop from the original numbers. By itself, this isn't so bad. Companies have bad quarters. As an investor you learn to just ignore these things and keep collecting the dividends through the recovery.
Where this differs from a normal bad quarter is the cause. For a long time there have been predictions that Intel was falling behind. It's virtually nonexistent in the mobile sector (phones and tablets), losing out to companies like ARM Holdings (ARMH) and Qualcomm (QCOM). While PCs and servers will remain important for business, the news from Intel verifies what was being said; PCs are slowly being replaced with newer, better options. As a result, the share price quickly dropped and there are new predictions being made that this is the beginning of the end for Intel.
Before I sold my shares, what did I really know? Nothing. Like most people involved with the stock, I read some articles touting the "end is near" predictions and other articles stating that Intel is investing heavily in mobile computing and will be beating ARM Holdings to a pulp in no time. Unfortunately, both sides made excellent points, leaving me with the same uncertainty.
Given this limited knowledge, I made a decision. If I sold now, I could still make a good profit. In addition, I made note that the Dow, S&P and Nasdaq are at their highest values in 4 years. While I've read nothing about a market pullback and don't expect one, there's that additional risk that if one were to occur, Intel shareholders, namely me, would be in a world of hurt. At the end of the day, I'd rather miss out on making a large profit than take a loss. I chose the profit.
With my shares sold, I have some new possibilities in front of me. The first is to buy back my shares. If it turns out that Intel really is on top of their game and they enter the mobile market with a bang, I'll reinvest. Like I stated above, their price hasn't had any huge upward swings, so at worst I'll take a slight loss to regain my position. Another option? Options. With the profits from selling in my account, I'm free to sell put options to make up for the lost dividends. If I go with this route, I'll most likely sell puts in McDonald's (MCD). I think they're at a good price point and if it drops, I wouldn't mind owning the shares. If the options expire without being exercised, that leaves me back at the first choice, with cash in hand, ready for any good updates on Intel to buy back my position. Otherwise, I have some free money in my account that I can do whatever I want with.
Tell me what you think. If you're in a similar situation, I'd like to read about your thoughts on the subject. Did I fall prey to fear, or rational thought? Remember, Warren Buffett made the same move, so if you criticize me, you're criticizing him as well. Thanks for reading and please leave comments below.
Disclosure: I am long MCD.