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.

Bloggingstocks writes about ten stocks that are better than CDs. There are two separate posts: this one and this one. Most of them are related to the energy sector, a couple of banks, and one consumer discretionary pick.

However, if you feel safe trusting your money with WaMu, they are offering 5% for a 12 month CD in an environment where few banks are offering more than 4.25%.

Fortune recently listed 40 of the best stocks on which a person can retire. They subdivide the list into 5 categories: growth and income, bargain growth, deep value, small wonders, and foreign value. As I am on the road to becoming a value investor, the “deep value” stocks are what interested me the most. So what type of stocks does Fortune consider to be deep value?

First is Applied Industrial Tech (AIT), a maker of bearings and transmission components that is a “cash-generating machine.” Second is Carlisle Cos. (CSL), a maker of construction materials, roofing and tires that “has weathered the housing crisis and should post double-digit profit increases for the next few years.”

Third is Cascade (CAE), a parts maker for forklifts and other industrial trucks. Fourth is National Presto Industries (NPK), maker of stuff from diapers to ammunition and appliances. Fifth is Pfizer (PFE), the huge pharma company.

Sixth is Regal Beloit (RBC), maker of energy-efficient motors. Seventh is UST (UST), which does chewing tobacco like Skoal and Copenhagen. And last is VF Corp. (VFC), owner of clothing brands like North Face, Wrangler, and Vans.

All these stocks have current ratios of 2.1 or higher, meaning that they all have very low debt and will most likely be persevere through the current credit crunch and economic downturn. Also, they have very low P/E ratios: all or 13 or below, except for UST which has a P/E of 16.

I myself owned VFC during 2007 making a decent short-term profit. The fact that its mentioned as a value stock makes me want to go back and look at it again. I’ve also been eyeing Phizer for 6 weeks. I know that some of its drug lines are about to expire, but still, the stock’s decline and super-low P/E ratio for such a huge company boggles my mind.

Bruce Berkowitz has lately been mentioning healthcare and pharmaceuticals as good value picks. I agree that this is a good area to be in at the moment as there seem to be an abundance of unliked stocks in this sector, but it would be prudent to choose four or five different stocks in order to diversify against risk.