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Mason Hawkins' Southeastern Asset Management Comments on Dell

May 23, 2012 | About:
Holly LaFon

Holly LaFon

277 followers
Summary: Of everything they own, they measure on intrinsic value of the business, and on that front Dell (DELL) has blown away all expectations. They are organically growing in the 20s; bears are focusing on metric they want to, that revenue growth is low. Southeastern does not care about that. Most relevant that they are growing profits. They are not worried about it at this point. Dell has evolved from a PC business to becoming the IBM for small and medium-sized businesses, domestically and globally. Sells for cheaper multiples than IBM and believe it will outgrow IBM in the next decade. Believes there could be a surprise after November when U.S. companies are not treated discriminatorily as they are today and our tax policies allow us to bring our foreign cash back to the U.S. Dell has $5 in net cash predominately overseas and if that comes back to the U.S., they will be more aggressive on the repurchase front therefore building more intrinsic value per share at low risk. That cash earns very little and contributes almost nothing to current earnings so there’s great opportunity to put it toward acquisitions to add to earnings power or used prospectively if we have the laws changed for us to repatriate it back to the U.S.

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