Monday, September 9, 2013

Sale - INTC / Purchase - PM

Figuring out what to do with INTC has been on my mind for a while.  I'm obviously not happy with the dividend freeze and a freeze is reason enough to consider a sale.  I'm also concerned about poor operational performance and a general trend of declining PC sales.  Intel has been trying to pick up the slack by expanding into mobile, which we all know has been a disappointment so far.  If mobile doesn't work out, this company could be in huge trouble.  I've held shares of this stock for two and half years.  You can bet my patience is wearing thin.

On the other hand, the new mobile products hitting the market seem to be a step ahead of the competition.  INTC has a real opportunity to make a splash soon.  Still, I wonder if grabbing control of the mobile processing market (with the lower margins) would be enough to offset the declining PC business over time?  Or maybe it will be a massive success?  My hunch is that Intel will end up doing well in mobile.  With all the r&d, they damned well better be!  Throw in a decent valuation, and it might be worth sticking around to find out.

Tough call.

I decided to replace 92 shares, and see what happens with the other 92 shares.  As you can probably tell I'm still torn with INTC; valid arguments can be made either way.

I used the proceeds from this sale to fund a Philip Morris purchase.  PM is one of my core stocks and has been a fantastic holding the past few years.  I think we have a dividend contender in the making here, maybe even a dividend champion years down the road!  This purchase price is near the 52 week low and came standard with a 4.06% yield before commission.  I think a 4% yield is a great buy point for PM and certainly more attractive than INTC with all the question marks surrounding that company.

Philip Morris is due for a dividend increase later this month.  I don't know if we'll see a 20% boost like a few years ago, but I'm happy with a 6% raise.  That's enough to beat inflation and improve my purchasing power.
PM is now overweight within my portfolio at approximately a 6.7% weighting.  Nothing to be especially concerned about, and it ought to work itself out organically as I build up to 50 positions.


  1. CI,

    I can't blame you here. INTC is in a tough spot. The only reason I'm holding is because they are on the cusp of either making it or not making it. Future visibility regarding success in mobile will be much greater later this year and early in 2014. If there isn't much traction at that point I'll be out.

    Regarding PM, I'd join you in buying but I have a larger weighting than I'd like to have already and buying more would just further tilt that scale. However, like you say my portfolio will fill in around that position organically as it grows so I don't mind temporary alignment/balance issues as long as they're corrected eventually. I'd also be happy with a 6% or so raise, but I think we might see as high as 10% or so. MO definitely surprised to the upside.

    Best wishes!

    1. Yes it's make or break time. I'm fairly conservative and am not one to place big bets on future technology. You know I don't like tech stocks, it's not my style.

      Replacing BWP and INTC the past couple months has dramatically increased the quality of my holdings, which I'm very pleased about. I have a couple other holdings I might reevaluate in the future, but I'm extremely happy with this path towards high quality.

      MO continues to surprise me each and every year! Incredible! I had 3 potential replacements in mind here: PM, MO, and KMI.

  2. I have followed Intel for 20 years. As historical perspective, it is an amazingly volatile stock, and they have a history of major misses and warnings. Yet over the long haul, they have always managed to get back on track. Obviously it is very possible for a company to successfully adapt for years and then fail, so I'm not making any prognostications. I'm just pointing out that they've been in this situation before. Only time will tell what happens this time.

    1. Thank you for sharing your perspective, I really appreciate it! Obviously you have a lot more investing experience and wisdom than I do. Thank you. I have noticed the volatility you speak of.

      Please keep in mind I still own 92 shares and have not completely abandoned Intel. 92 shares is currently worth over $2,000 which is more than I earn on a payday. I have no plans to sell my remaining shares, and hope everything works out for this company. If it does, INTC can go back to raising dividends.

      Fun fact: INTC was the first stock I ever owned in my entire life. I bought (on a recommendation from my dad) around $2,000 worth in the 90's which went up something like 1,000% back when it was a growth stock. Intel paid for my first car.

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