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Mason Hawkins Adds Leverage by Swapping Dell Shares for Options


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I only see LEAPS for 2013 on Yahoo. He bought 2015 calls.  Is this a custom transaction that only institutional buyers have access to?

 

Per the big short, ya.

 

This is essentially what I do with 2 year options. Typically I want them dirt cheap or need a catalyst. It works quite well unless we have a massive downturn towards the end of the option contract  :).

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Saw that article when it came out a week or two ago.  I did the same thing, only with the LEAPS.

 

On Dell, whats your thesis? Same as everyone else? It seems cheap but they are buying expensive things. Per the economist they have no choice. Them and HP are under-siege with the tablets and phone devices.

 

I like the move into the cloud, but believe this area of tech is simply too competitive.

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Saw that article when it came out a week or two ago.  I did the same thing, only with the LEAPS.

 

On Dell, whats your thesis? Same as everyone else? It seems cheap but they are buying expensive things. Per the economist they have no choice. Them and HP are under-siege with the tablets and phone devices.

 

I like the move into the cloud, but believe this area of tech is simply too competitive.

 

It'd be too much work to rehash the simple thesis on this thread.  Just do a search for DELL and you'll see that there has been a lot of discussion on it, and I've posted several times in these discussions.  I even owned when it went all the way to $9 during the financial crisis, traded out for a nice gain, and have rebuilt a substantial position over the last year.  In fact, it's my largest position at the moment.

 

To be frank, people who say that DELL's acquisitions are expensive don't really get the business and are just going off current numbers without even giving a little bit of thought to the matter.  They look at the financial statements of the targets and make snap judgment assessments based on past numbers.  You have to really try to understand how DELL's business works, what the new business lines can be under the DELL umbrella, and then figure out what the real return could be given the competitive space and the size of the market.  You also have to do what I suppose some would call a Porter analysis except that I don't really know what that entails -- I hear it's supposed to teach business school students how to think about strategy. 

 

Patrick Byrne just made an interesting comment about Overstock's competitive outlook and how people don't get that it's like swimming in Lake Michigan with the other guys.  That's a very interesting way of pointing out that sometimes people don't really see the forest from the trees.

 

By the way, in order to assess DELL, you also should have a good understanding of the "tech" business, and most value investors do not really have a good understanding of the "tech" business.  They either think of "tech" on very simple terms and make big mistakes buying into companies they know nothing about or just throw the entire sector out as outside their circle of competence.  Better to do the latter than the former.  Also, it's better to realize that sometimes it's too hard to figure out how things will unfold no matter how in the know you are.

 

I just read the Economist article (has been sitting on my coffee table).  It's a pretty good article, but it doesn't really tell you whether DELL is a good buy given the competitive landscape, the actions that DELL has taken in that respect, and the price that the company is trading at.  You have to figure that out yourself. 

 

Or just pass -- you can make money plenty of other ways.

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Thanks TX, I will search for those other threads. I think I can understand tech but you are right, I have put no time into this at all and am really just looking at the bidding wars and prices paid. Dell is dirt cheap and alot of smart guys own. Its worth a look for sure. I will add it to the list. I just keep seeing value guys posting about negative working capital  :), my eyes kinda glaze over. Im like thats not a reason to buy.

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Thanks TX, I will search for those other threads. I think I can understand tech but you are right, I have put no time into this at all and am really just looking at the bidding wars and prices paid. Dell is dirt cheap and alot of smart guys own. Its worth a look for sure. I will add it to the list. I just keep seeing value guys posting about negative working capital  :), my eyes kinda glaze over. Im like thats not a reason to buy.

 

I don't doubt you can understand it, but you'll definitely have to put a lot of time into it.  Keep in mind that I've been immersed in tech from when I was in school (engineering degree, with concentration in tech and policy) to when I worked in Silicon Valley to when I practiced as a technology lawyer.  I am very familiar with certain sectors of the "tech" industry, and I feel that I know enough how to assess the situation and when to throw things out as being too hard. 

 

Yeah, simplistic analysis about negative working capital and cash on the balance sheet isn't the right way to go about investing in a company like DELL, which some would even say is not even a tech company.  I mean, when you read Hawkins/Cates talking about their investments, you can tell that they've done a lot of work.  HWIC has certainly done a shitload of work on DELL.  It is, after all, one of their largest US equity holdings.

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Guest Bronco

I know less than 0 on Dell but I get the feeling they want to be like an IBM - constantly morphing and maybe relying less on computers and more on services.

 

Probably a good strategy. Throw in the word cloud for more mojo.

 

Computers now are completely a commodity business - they missed the phone and tablet market.  Might as well stick to servers and services.

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