Michael Price (Trades, Portfolio) runs MFP Investors, a New York-based hedge fund that focuses on value investing. Price is one of the richest people in the world, according to Forbes. The fund disclosed an equity portfolio valued at some $699 million as of the end of the third quarter. The equity portfolio is mainly invested in Finance (37%), Technology (16%) and Health Care (15%) stocks.
So in this article, let's concentrate on Price's latest 13F filing. Among the 10 largest holdings from Price's equity portfolio (which comprises 41.11% of the total portfolio value), I'll look into his principal position.
Intel Corp. (INTC, Financial) is Price's principal holding. MPF holds 8.33% of its portfolio in this $163.94 billion market cap company, with 1.85 million shares. The value of the stake amounts to $55.76 million. The principal shareholder is Jean-Marie Eveillard, with 28.65 million shares, valued at $863.43 million, held as of the end of the third quarter. Ken Fisher (Trades, Portfolio) also has an important position with 19.36 million shares valued at $583.45 million. In the July-September period, the stock lost 0.13% and on a year-to-date basis the loss is more than 4%.
Intel stock price has been moving in a trading range of $24.87 to $37.90 in the past 52 weeks. Its last price of $34.46 is almost at the top of the range.
The stock has surged by more than 50% since 2012. According to Yahoo! Finance, the estimated one-year target share price is $35.92, so if you buy shares at the current market price, your return from price appreciation would be 4%. Also, you have to consider any cash flow received by the asset. So for holding the stock one year, you'll be paid a dividend of 96 cents at the end of the year.
If we divide this number by current price per share, we obtain the dividend yield, which is the other component of the return on investment for a stock, and in this case is 2.8%. So the total expected return for investing in Intel will be less than 8%, which is not attractive. During the past 13 years, the highest ratio was 4.51%, the lowest was 0.66%, and the median was 2.86%. It is appropiate to mention that the firm has recently raised its dividend to $1.04 per share per annum.
Some couple of weeks ago, Intel’s investor meeting calmed the market as presentations said that certain segments such as data center, nonvolatile memory and Internet of Things can mitigate the negative impact of declining computing sales.
The industry fundamentals continue raising doubts, but the fundamentals should improve next year. The firm should take advantage of market share gains and new innovative devices. Further, the company has announced partnerships in key areas like Asia as well as efforts to improve its performance in the mobile device market.
This semiconductor company has good metrics to consider it as a candidate for an investor's portfolio. The stock's ROE of 21.7% quadruples the industry median.
We can calculate operating margin as operating income divided by its revenue. Taking the company's operating income for the three months ended in September and its revenue for the same period, Intel's operating margin for the quarter that ended in September was 28.98% ($4.192 / $14.465). In the next table, we can appreciate the margin expansion that is a sign of strength within the company.
| Quarter Ended | Dec05 | Dec06 | Dec07 | Dec08 | Dec09 | Dec10 | Dec11 | Dec12 | Dec13 | Dec14 |
| Operating Margin (%) | 31.14 | 15.97 | 21.43 | 23.82 | 16.26 | 35.73 | 32.37 | 27.44 | 23.32 | 27.47 |
Moreover, Intel had a gross margin of 62.99% for the quarter that ended in September, and we can appreciate a recent upward trend.
From a valuation standpoint, trading at a 14.7 P/E, which stands at a discount compared to the industry median, indicates that other companies operating in the same subindustry are more richly valued. Some of its major competitors include Altera Corp. (ALTR, Financial) and Texas Instruments Inc. (TXN, Financial). The following table compares the current valuations:
| Ticker | Company | P/E Ratio |
| INTC | Intel | 14.70 |
| ALTR | Altera | 47.86 |
| TXN | Texas Instruments | 20.81 |
Final comment
David Dreman (Trades, Portfolio) was bullish in the trimester. He upped his stake by 83% and has a stake of 40,705 shares. On the other hand, Chuck Royce (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) sold out the stock. Intel stock is not cheap at its current price, and investors are urged to wait for a better margin of safety before investing in this stock in which valuations are at a high level and probably are not supported by fundamentals. Although Intel's acquisition of Altera represents an invaluable opportunity in the Data Center segment, investors should wait for a $28 to $30 entry level.
Disclosure:Omar Venerio holds no position in any stocks mentioned.
