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Carl Icahn Enters Confidentiality Agreement with Dell and GE's Immelt Plans to Return $18 Billion to Shareholders

March 11, 2013 | About: DELL +0% GE +0% DKS +0% IEP +0%
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U.S. markets will look to continue their march into new record territory after the terrific week they had last week, in which I believe it didn’t have a down day. I believe varket valuations are a bit rich, but that doesn’t mean we will have a correction anytime soon (see: Everyone Is Making Money but You). Based on a historical ratio of market cap to GDP, we are modestly overvalued and are expected to return 3.1%.



The other ratio I like to keep an eye on is the Shiller P/E which currently stands at 23, well above its mean of 16.5.

Special Situations

Dell (DELL) is once again in the spotlight after it entered into a confidentiality agreement with Carl Icahn and Icahn Enterprises (IEP). After the confidential agreement was announced, Icahn Enterprises said in a brief statement that it “looks forward to commencing a its review of Dell’s confidential information." No further details were released and shares are mixed in early trading. In a letter to Dell last week, Icahn opposed the buyout (and buyout price) and recommended the PC maker issue new debt and offer a $9 special dividend to shareholders. If the board did not accept his plan, he threatened “years of litigation.”

Michael Dell and private equity firm Silver Lake Partners are sure going to have to fight to go private at the proposed $13.65 and I believe that’s reflected in the premium of the current price.

Other Gurus who stand to benefit from a higher bid include:
[u]
  • Donald Yacktman, Yacktman Asset Management
  • Francis Chou, Chou Associates Management
  • Bill Nygren, Oakmark Fund
  • Steven Cohen, SAC Capital Advisors
  • David Dreman, Dreman Value Management[/list]Earnings

    Shares of sporting goods retailer Dick’s Sporting Goods (DKS) are under pressure after the company reported fourth quarter EPS of $1.03 versus analyst estimates of $1.06. Revenue also fell short of analyst estimates. Both numbers were at the low end of the company’s previous guidance and management blamed lower same-store sales of outer and cold weather accessories that offset positive trends in athletic footwear and apparel. Putting further pressure on its shares is management’s forecast for the year which was also below analyst consensus.

    Gurus for the most part have been net sellers of the sporting goods retailer which most selling out or reducing their positions in the past two quarters. Those Gurus who either sold out or reduced their positions in the last quarter include:

    Guru Louis Moore Bacon was the lone bull as he established a new position that had a 0.25% impact to the Moore Capital Management portfolio.

    Shares of General Electric (GE) are mixed after CEO Jeff Immelt stated in its letter to shareholders that he plans to return $18 billion to investors through an increased dividend and share buybacks. Since 2000, GE has paid $106 billion in dividend which is second behind Shell. The letter is a must read for business and finance individuals as it details the conglomerate's near-term strategy and the challenges it faces in the global economy.

    Gurus for the most part have been bullish in the industrial conglomerate with several establishing new positions. Although the positions are small, they do show some bullishness in a stock that has pretty much been trading in a range for the past decade. Gurus establishing a new position include:


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