Wednesday, February 20, 2013

My Dell Went Mmm

On May 23rd 2012, I was feeling pretty giddy about a purchase I had made in shares of Dell, tweeting:

"Caught a falling knife by the name of $DELL today. In a few yrs, expecting cuts healed and new knife to be used to open bags of money"

Such overconfidence is strongly discouraged, and will often get you killed. But in this case, the purchase worked out. As Dell continued to fall, investors could have picked up this extremely cheap, well-run company that is managed/owned by its founder for an ex-cash P/E of barely over 5. I hope you did! The company has since received a buyout offer from a group including Michael Dell to take the company private.

While the returns arrived a little bit sooner than I had anticipated in that tweet, they were not as large as I expected. I think Michael Dell is getting a great deal on his company. Unlike other investors, I don't blame him for trying to "steal" this company; he's doing exactly what he should be doing. I blame Mr. Market (i.e. all of you!) for assigning such a poor valuation to this company, such that a takeover at this price (P/E of about 9) is possible.

While some shareholders are holding out and hoping for a better deal, that's not my game, so I have sold my shares.

The problem is, in this market, it is getting harder to find value! Any suggestions?

Disclosure: No position


Anonymous said...

shift your foucs to Europe or Chinese small caps. Research SIAF for example, I´m sure you won´t regret it!

IRE is still a good buy and you can find value in the NG sector

keep up the good work, I really like your blog

Sachin said...

I'm finding a hard time finding value in this market too! In fact, I'm fully cashed out and am only considering Apple as a potential investment if it falls a bit more. I just don't believe in the market at this level and I think things are broken on the inside.

I check your blog almost every day but lately there have been fewer posts - I knew it must be a sign that you also are finding little of interest! Thanks for posting!

Martin said...

I am also very cautious buying in this market, but I hold primarily for dividends and trading options, so as far as the company is a good dividend payer I hold and buy dips. I think a good candidate for addition could be Lorillard (LO) which is now falling (hope the fall will continue). For me DELL is dead.