One of the biggest challenges for any hedge fund manager is not necessarily returns, but raising capital. With 8,000 hedge funds out there and most returning between 6% and 10%, it's difficult to be able to say, "I'm special!" and raise additional money to invest.

"We don't have this worry," a friend of mine at MSD Capital once told me. "Every few months Michael Dell sells another $200 million worth of Dell ( DELL) stock, and it goes right into MSD Capital."

MSD is, of course, Michael S. Dell and MSD Capital is how Dell diversifies away from the massive holdings in his own company. MSD Capital's top holdings can be found on its Stockpickr page.

In 1984, while still a student at the University of Texas at Austin, Dell started putting together computers for his buddies in his dorm room. That business became the $55.9 billion-in-revenue company Dell is today.

Unlike Bill Gates, Michael Dell does not avoid investments in the technology industry, despite the fact that the fortunes of his own company are closely tied to tech. After all, who better than Dell to know exactly which tech companies could catch fire and move up over the next year?

For instance, Dell likes Tyler Technologies ( TYL), which is in a great, entrenched business. It provides information technology (IT) services to local governments: budget software, software for courts, tax appraisal software, 911 systems, systems that walk people through the arrest process, etc. Last year, the company had 71% earnings growth. This year, analysts are expecting a more modest 28% growth.

The stock has been a steady performer for Dell:


Tyler Technologies (TYL)


Last year, Tyler repurchased 1 million shares at an average price of $10.19. The company has more than 6,000 local governments as clients. And with more than 100,000 potential local governments out there, it has plenty of ammo to move up. First Investors Special Situations, up 21% in 2006, is also a shareholder of Tyler. Check out First Investors Special Situations' Stockpickr page here.

Another stock that Dell holds is Greenfield Online ( SRVY). As its symbol suggests, Greenfield is the premier site for online surveys. There's no easier-to-access focus group than the millions of consumers online, and Greenfield puts together Internet panels for marketing companies based on what those companies want to research.

For instance, if the big car companies want to know how effective their latest ad campaigns are, they go to Greenfield. As the Internet becomes more accepted as a platform for marketing research, Greenfield will continue to grow.

The company was successful in 2006, as the chart shows.


Greenfield Online (SRVY)


Greenfield has $29 million in cash, no debt, and trades for just 13 times cash flows, as measured by enterprise value over EBITDA (earnings before interest, taxes, depreciation and amortization).

One of my favorite hedge funds to piggyback, Cannell Capital, owns Greenfield shares. Cannell is largely unknown, but has had phenomenal returns since its inception in 1992. It has never had a down year.

From 2000 to 2002 it returned 32%, 41% and 27%, respectively, despite being mostly a long-only shop and despite the massive bear market during that time. Last year, Cannell returned a healthy 15%. You can find Cannell Capital's top holdings on its Stockpickr page.

Dell also likes calorie-rich casual dining stocks, with holdings in both IHOP ( IHP) and Steak n' Shake ( SNS). In particular, Steak n' Shake appears cheap, trading at just eight times cash flows, with analysts expecting about 10% earnings growth over the next year.

For the rest of Dell's holdings, take a look at his page on Stockpickr.

Stockpickr tip of the day: A search for "Cramer" on Stockpickr will give you results that include several portfolios related to Jim's television show "Mad Money." For example, there's the buyout stocks list from his Nov. 13 show, his list of growth and value picks for 2007, and so on. But most importantly, you'll find Jim's Stockpickr page, where you can send him a note.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.

Interested in more writings from James Altucher? Check out his newsletter, TheStreet.com Internet Review. For more information, click here.

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