This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Our Dell Holding Is A Winner Regardless Of Buyout Drama

Stocks in this article: DELLGLDTLT

By Sherman Lee

Second quarter and year-to-date 2013 was not kind to long-term U.S. Treasuries (TLT) and gold (GLD). With higher-than-expected job creation reported and ongoing Fed talk about QE “tapering”, U.S. Treasuries and gold took a shellacking as investors fled the party before the punch bowl was taken away.

In 2013, U.S. Treasury bonds and gold have cratered to new-52 week lows falling 7.42% and 27.00%, respectively, while equities (SPY) have climbed 10.41%. See chart below.

After the fallout in Treasuries, Fed Chairman Ben Bernanke wasted little time to reassure markets by announcing that a “highly accommodative monetary policy for the foreseeable future is what’s needed in an economy plagued by high 7.6% unemployment and low 1% inflation.”

The markets promptly jumped on Bernanke’s pro-QE comments. The three major equity averages all rose better than 1%. Additionally, Treasury and gold prices advanced while the U.S. dollar plunged in the wake of Bernanke’s comments.

To calm QE-holics, Bernanke reiterated, “It may well be sometime after we hit 6.5% unemployment before rates reach any significant level. There is some prospective, gradual and possible change in the mix of instruments, but that shouldn’t be confused with the overall thrust of policy which is highly accommodative.”

With Bernanke’s foot on the QE pedal and equity markets reaching all time highs, we remain cautiously optimistic. It’s safe to say that the low-hanging fruits are few and far between today. In that light, we were able to add two new positions in the second quarter.

The larger of the two acquisitions was Dell Inc. (DELL). Dell is currently in a proxy battle between founder and CEO Michael Dell and private equity firm Silver Lake against major shareholders Carl Icahn and Southeastern Asset Management.

The Special Committee of the Board of Directors of Dell has backed Dell and Silver Lake’s offer to take the company private in an all-cash deal valued $24.4 billion or $13.65 per share. Icahn and Southeastern are urging investors to vote against the deal at the Special Meeting of Shareholders scheduled for July 18, 2013. Stay tuned.

Whether the deal gets voted down or not, we believe we are in a good position to win either way. A $13.65 buyout would be accretive to the portfolio immediately. A stay public outcome would likely result in share price erosion in the short-term, but an overall higher long-term gain (albeit with higher uncertainty/risk).

As we head into the third quarter, the portfolio remains defensively positioned due to higher general market valuations. While we believe it’s prudent to be cautious at these levels, we remain steadfast in our search for opportunities wherever when can find them. To learn more about Prudent Value, please click here.

The investments discussed are held in client accounts as of June 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

Sherman Lee

Sherman Lee

Prudent Value is an independent, fee-based registered investment advisor to individuals, high net worth individuals, trust programs, and charitable institutions.

null

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,370.29 +174.87 1.02%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,624.88 +58.7420 1.29%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs