O’Keefe Stevens Advisory Inc., an asset management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. At the end of 2021, the fund’s top 5 holdings represented almost 41% of its assets. As of December 15th, the Russell 3000 Index, which tracks the performance of the 3,000 largest US-traded securities, was 3.4% off its all-time high. 2,288 (76.2%) of the index was 10% or more off its all-time highs, 1,068 (30% of the index) was more than 30% off its all-time high, and 559 (18.6% of the index) was more than 50% off its all-time high. The mega-cap names, including Apple, Google, Amazon, Nvidia, and others, have kept the market up due to their significant index weight. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
O’Keefe Stevens Advisory, Inc., in its Q4 2021 investor letter, mentioned Intel Corporation (NASDAQ: INTC) and discussed its stance on the firm. Intel Corporation is a Santa Clara, California-based semiconductor company with a $194.3 billion market capitalization. INTC delivered a -7.32% return since the beginning of the year, while its 12-month returns are down by -14.02%. The stock closed at $47.73 per share on January 28, 2022.
Here is what O’Keefe Stevens Advisory, Inc. has to say about Intel Corporation in its Q4 2021 investor letter:
“Intel Corp (INTC) – We originally purchased Intel in August 2020 due to the substantial FCF generated and $10B+ yearly in R&D and Capex invested over the past several years. The technology lead it once had was gone as competitors such as TSMC, AMD, and others in the CPU and Data Center group surpassed Intel. Even though Intel had years of business underperformance because of delays in releasing new products, we believed the amount of capital spent at the company would allow them to catch up and reclaim market share. We knew this type of turnaround, given the company’s size, was not going to be quick or easy. However, we believed the price offered more than compensated us for the risk of failing once again.
In January, Intel announced Pat Gelsinger as the new CEO. We were happy with the hire as Pat was Intels original CTO, helping Intel become the dominant player in the industry it once was. We became increasingly worried that Pat was not the right guy in the months and quarters following the announcement. Mr. Gelsinger appears to be viewing the world through rosecolored glasses (though we do recognize the CEO is the heart and soul of the organization, so we understand to a certain extent why he talked the way he did). Intel’s FCF gave us some comfort that it could afford to continue investing in new products while repurchasing shares or making acquisitions.
In the most recent quarter, the company announced an ambitious spending plan. In 2022, Intel expects to spend between $25-$28B in capital expenditures plus another $15B in R&D, with the potential to spend more if an opportunity presents itself! The FCF cushion we once had is likely gone for the next few years as Intel bets the farm to return to a market-leading position. While the future for Semiconductors is very bright, and end markets such as Data Centers and Autonomous vehicles are growing rapidly, we worry about the potential ramifications should INTC’s investments prove to be ill-fated like the past decade. Understanding what INTC will earn next year is a challenge in and of itself. Thinking about what it could be in 3-5 years is likely nothing more than a guess. With our downside protection gone and uncertainty surrounding the business’s future, we decided to sell the position. We are long-term-minded and are willing to ride out short-term pain. However, when the facts change, we must update our prior views.”
Photo by Slejven Djurakovic on Unsplash
Our calculations show that Intel Corporation (NASDAQ: INTC) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. INTC was in 66 hedge fund portfolios at the end of the third quarter of 2021, compared to 78 funds in the previous quarter. Intel Corporation (NASDAQ: INTC) delivered a -2.59% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on INTC in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
