Yes and Not Yes

Last night I stayed up way past my normal bed time listening to excerpts of the Longleaf Partners Funds’ most recent annual presentation. Though the presentation took place back in May, I’m glad I eventually got around to listening. Mason Hawkins and Staley Cates are the two main guys who run Longleaf and they are true-blue value investors.

The two qualities that impressed me the most - aside from their impressive investing record at Longleaf - were their confidence in themselves and their wit. Hawkins and Cates responded to questions with commanding knowledge and reiterated their investing philosophies in a way that their audience could easily understand.

Turning now to stocks, Dell (DELL) is the top holding of the Partners Fund (LLPFX), taking up 9.3% of the portfolio. This is a huge stake, and after listening to the excerpts of this year’s presentation, I am pretty convinced that Dell is presenting a great opportunity for investors.

Cates and Hawkins go into some detail on the reasoning behind their Dell investment during their response to a general question about technology investing. According to Longleaf, Dell has:

• strong, organic revenue growth;
• cash flow growth that’s even higher;
• value that’s growing even faster than cash flow because they’re buying back very cheap stock at a rapid pace; and
• an opportunity to provide their products to everyone in the world

Hawkins says that Dell isn’t a tech company—it’s more an assembler or retailer.

Additionally—and more tantalizingly—Hawkins feels that Longleaf has “an eight- to ten-bagger” with Dell. Hawkins made this statement in May when Dell was at $20. Today, Dell is back at $20 after plunging the most in almost eight years after saying the U.S. slump in technology spending has moved abroad. I think this is probably another opportunity for Longleaf, Dell, and perhaps other like-minded investors to purchase even more shares.