Wrong! Tactics and Strategies: Cramer Explains His Intel Thinking
By James J. Cramer
10/16/97 8:12 AM ET
Where is it written that consistency makes the most sense as an investment philosophy? Investing is a process that requires flexibility, not consistency, to survive and prosper.
What prompts me to write this missive is the batch of angry e-mails I received when I stepped to the sidelines on Intel. I'm not talking about the upset readers who wish that I had been clairvoyant and got out ahead of Intel's numbers. I wish I had been, but I wasn't. I am not grousing about the incredibly childish subscribers who were furious that, even though I had been praising Intel for 15 years, I did not call the absolute top correctly.
I'm focused on a much larger group who believes I have committed a cardinal sin for changing my mind about Intel. What nonsense!!!! I have two chores in this business, I must assess a company and then I must assess its stock. These are two very different animals. I believe that consistency is a vital part of judgment when it comes to the former. You can't make any money if one day you think Intel's management is bad and the next day it is good. No sense even trying if you can't make up your mind about what a company does and how it does it.
But stock prices? Don't be ridiculous. Stock prices are a function of psychology. They are a distillation of everything and everyone's thoughts about the company's prospects and how much we should pay for them. The idea that we must be loyal and hardlined about that concept is nothing short of ludicrous.
Let's go back to Intel. I rather glibly answered one reader's response about why I switched out of the stock by saying "the Worth article." That was just mean-spirited shorthand for "everybody knows what I know" and too many people are currently worshipping at the altar of the chip-maker to make me comfortable. I do not like being part of the crowd; I am a contrarian by nature. I am looking to be where people aren't, not where they are. The Worth article was a clarion call for me; it said that regardless how much I loved Intel the company, Intel the stock had too many suitors for my taste and they left no room for disappointment.
My case for Intel, the stock, has always been the same: management will keep driving better and better product which will be needed so that the company should sell at a premium multiple to the market rather than at a discount. This fall Intel traded to a premium. My mission has been fulfilled. Others have discovered that Intel was cheap. Now it has become fairly valued. Yes, that makes me like it less. Intel is not a religious experience. It is people, bricks and mortar. I am on the hunt for people, bricks and mortar that the market has overlooked. To say that Intel is now overlooked is just plain stupid. It is probably the most discovered stock on earth!
When will I get back in? When we lose worshippers. When it becomes less expensive on the numbers. When people hate it again. Bound to happen. Always does. Let's at least wait until after this Worth article is off the newsstands! The body isn't even cold yet.
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