Intel reports earning on January 16th-This coming week. Much hype has been expressed by the longs and the shorts over this event but a disappointing or mediocre report means little long term -even a superlative one and here's why. The number of companies that are competitive with Intel in manufacturing central processing units (CPU) can be counted on one hand. Intel is dominant in PCs and servers. They lag in smartphones and tablets. Each new iteration produces CPUs that are faster, more powerful and more cost effective but this requires investment in the billions in research and development thinning the players. To create an Intel from scratch would probably require in excess of $100 billion dollars. There are emerging markets for CPUs in robots, automated cars, the Internet of things, wearable tech and infotainment systems. (Let me know what I missed). There are few companies that will be able to compete for these emerging markets and Intel is certainly one of them. There is no guarantee for success (Look how Intel missed the smartphone market) but these emerging markets are enormous, maybe dwarfing what we've seen so far. The competitive race in the processing industry is a marathon, not a sprint, and Intel arguably has the pole position. I say Berkshire Hathaway may have made a strategic mistake shorting Intel-they made short term profits but are going to miss out of what may come. But it's not too late: If it's a disappointing report consider buying on the inevitable knee jerk dip.
It wasn't actually Buffet but a co-manager. To be accurate Berkshire bought Intel in the low twenties and sold all in the high twenties just before it fell significantly in price. So they made 25% profit plus dividends in less that a year but in the past Buffet would double up at the low price-that strategy worked pretty good so far. Perhaps the mistake was not buying back in when Intel fell back to the low twenties. Time will tell.