News Analysis date published New: 
Saturday, November 26, 2011 - 11:00
New Date created: 
Tuesday, February 28, 2012 - 15:09
New Date last updated: 
Saturday, November 26, 2011 - 11:00

Buffett Just Bought 9.3 Million Shares of This "No-Brainer" Investment

Saturday, November 26, 2011 11:00 AM

It's become one of my favorite stocks. I like to call it my "no-brainer" investment for 2012. I've even selected it as one of my "Top 10 Stocks for 2012."

The company is buying back billions of its stock. It has raised dividends at a torrid pace over the past five years. And the company just announced its sixth consecutive quarter of record sales.

Just days ago Warren Buffett's Berkshire Hathaway (NYSE: BRK-B) even announced it has taken a 9.3 million share stake in the stock, a position worth more than $200 million.

I'm talking about Intel (Nasdaq: INTC).

You likely know Intel already. It's a major blue-chip company and the world's largest semiconductor maker. It holds an 80% stranglehold on the PC semiconductor market. No one else even comes close. The computer you're reading this on is likely powered by an Intel chip.

Some people may see the stock as "boring" and say that it hasn't gone anywhere for years. But I see something different, and I think Buffett sees the same thing. Simply put, Intel's shares are becoming more valuable quarter after quarter, but the share price hasn't responded yet.

Simply look at the stats...

  • Intel is in the middle of an enormous share buyback spree. Over the past year, it has spent $11.5 billion to purchase 538 million shares. It still has $14 billion allocated to future buybacks -- that's more than 10% of the outstanding stock.
  • The company holds more than $15 billion in cash on the books. This comes out to $2.97 per share... more than 11% of the current share price.
  • Quarterly dividends have increased from $0.10 per five years ago to $0.21 per share today. That's growth of 110%. And in the past two years, dividends have grown 50%.
  • Right now, Intel's shares trade near the same level they did back in the spring of 2010, when earnings were just $1.09 per share during the previous 12 months. But today, earnings during the past year total $2.31 per share -- more than 100% higher.
  • It doesn't take the expert investing skills of Buffett to see why Intel could go higher in the months and years ahead. (For more details on Intel, I've profiled it the recent presentation I put together on my "Top 10 Stocks for 2012." You can read the entire profile here.)

    But there's another reason why I like Intel so much. After years of research, I've found that more often than not, companies that fit within a few simple categories are the ones that make you the most money long-term.

    • Companies that enjoy huge (and lasting) advantages over the competition.
    • Companies that are buying back massive amounts of their own stock.
    • Companies that pay investors each and every year by dishing out growing dividends.

    Intel fits all these characteristics perfectly. It's why I think it's a "no-brainer" investment. Strong companies that take care of their shareholders tend to do better over the long-run. It doesn't take a doctorate degree to understand that.

    Of course, with investing there's never a surefire thing. Even the seemingly strongest companies aren't guaranteed to deliver see a positive return.

    Action to Take --> But that said, if you invest in companies with one or more of these three simple traits, then I think it gives you the best chance of making money.

    [Note: As I said above, I selected Intel as one of my "Top 10 Stocks for 2012." But it's far from the only stock my staff and I found that has the traits described above. For more on this select list of 10 companies, you can read the research my team and I put together by visiting this link.]

    Paul Tracy does not personally hold positions in any securities mentioned in this article.
    StreetAuthority LLC owns shares of INTC in one or more of its “real money” portfolios.