Wallace Weitz, a superinvestor, from Omaha started buying Dell too! This is what Weitz said about Dell......
"Dell is a new position for us (and one likely to raise eyebrows among our investors). We generally avoid technology stocks because of their very short product cycles and unpredictable future free cash flows, but we do not think Dell is a typical tech stock. Dell markets directly to consumers and assembles computers, monitors, printers and other hardware to order. As a result, it takes very little inventory risk and can change its product offerings on short notice."
"In recent quarters, Dell has faced improved competition from Hewlett Packard and others and has created problems for itself by skimping on telephone tech support for its customers. As a result, sales have slowed, margins have slipped and the company’s cost advantage over its competitors has narrowed. We believe Dell has addressed these problems and that its cost structure, balance sheet, returns on investment and strong management provide the company with significant and sustainable competitive advantages. The company generates prodigious amounts of cash and is currently deploying it in a massive stock buyback program. We believe the company is worth considerably more than the current price of $24."
To read the complete article.
If Dell is a great buy for Weitz and Hawkins and Nygren and Tilson, I have great confidence that it is a great buy for us too.
Disclaimer: My Family Fund does not have a position in Dell.
Happy investing,
Dah Hui Lau (David)
2 comments:
Even though all the gurus are buying Dell as a value play, I see it as a value trap. I still remember when Digital was considered a value play and it's gone now. HP and Lenovo will continue to hammer away at Dell.
One of my friends in IT support says Dell has been the best thing for his business due to their low quality machines and horrible support. He gets tons of business from Dell owners and the first thing he recommends to them is not to buy Dell in the future if they want to avoid problems.
Hi George, thank you for your comments. I understand your arguments. When gurus buy, especially those with long-term records, it is a good indication that a company may be of good value. It is not necessary a good value, but a potential one.
I'm not suggesting fellow readers to follow blindly with the gurus, but study their moves to discover potential investments.
At the end of the day, good investors should understand why he/she invests in a company, and not just says he/she follows this or that gurus.
Regarding Dell, it has spent a lot more on improving supports. Dell understands its problems and try hard to improve.
Happy investing.
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