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Technology Stocks : Intel Corporation (INTC)
INTC 46.48-3.6%3:59 PM EST
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To: Emad Morrar who wrote (33044)9/29/1997 1:34:00 PM
From: Harry Landsiedel   of 186894
 
Emad Morrar. Re: "When you are thinking about investing some new money do you put it into your exisiting position in Intel, or do you buy some other stock...?"

This is not a simple question to answer, because there are many angles. One of the greatest wrongs done to most individual investors is the nonsense about diversification. If my memory serves me, Buffett has been successful in part because of the large investments he makes in a few companies. Phillip Fisher (someone Buffett rates as highly as Benjamin Graham) has only six investments. Buffett has, I believe, close to 40% in KO stock. When you add in Gillette and I believe Disney, the figure is close to 60% in those three stocks.

Because the value of a company is the flow of future earnings, the key of adding to your position is to calculate the intrisic value of what the company is worth over the period you want to hold it. For reference purposes, Intel is now selling for about 18% of its intrinsic value 20 years from now based on a 15%-20% growth rate for the next 10 years and 5% for the second ten years. This is exactly half of the 36% figure calculated for KO.

If you are interested in learning more about calculating intrinsic value, buy a copy of The Warren Buffett Way, by Robert Hagstrom Jr.

While there are other factors in making or adding to an investment, being able to compare the intrinsic values out 20 years or so is one of the best. IMHO.

HL
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