Author: Leif Eriksen
Model: Performance with Protection
Disclosure: Long DELL
It’s been another uncertain month for the markets, a challenging month for investors and maybe even more so for traders. Yet the markets are up for the year, with the DJIA leading the way (for a change). The Dow’s significant outperformance of the Nasdaq Composite so far in 2011 is another sign that this market is favoring blue chips over more volatile issues. As of 4/11/11 close, Google Finance shows the Dow up 6.94% year to date, and the Nasdaq Composite up just 4.47%.
Both of my models’ performance lagged the S&P 500 for March, and my Performance with Protection model has lagged the S&P500 for the year so far (as of 4/1/11, according to Covestor data). However, my confidence in the names in my portfolios has not lagged. They will do well for the long term and I believe they should outperform the benchmarks. The economy is getting stronger by the day, and my focus on companies that will benefit from macro trends such as globalization, aging populations, and the ever increasing role of technology in our lives should do well.
Since last month I’ve sold a few issues as well as added a couple. The most significant addition was Dell Inc. (Nasdaq: DELL). The catalyst for buying it was Michael Dell’s own recent investment in DELL. In the past month Michael Dell has invested approximately $150M of his own money in his namesake. A quick look at the valuation explains why. Trading at just over 8x forward earnings, 0.45x current sales, and only twice the value of cash in the bank it would be hard to find a more compelling value story, even if it only grows at the same rate as the economy. I’m betting it will grow faster.
Until next month, many happy returns.
Sources:
“Michael Dell Buys up More of PC Maker’s Stock for $150M” Bill Murphy. Dallas CityBizList 3/23. http://dallas.citybizlist.com/16/2011/3/23/Michael-Dell-Buys-up-More-of-PC-Maker%E2%80%99s-Stock-for-150M–cbl.aspx
Dell earnings, sales and cash data from Yahoo Finance
