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We're gonna bring in -- room -- a value investor from -- -- asset management -- joins us from our Washington bureau and thanks so much for joining us here as -- I mentioned off the top where an air you know multi year highs not too far from historic highs yet.
-- you're uncovering value and in May -- where a lot of people aren't looking.
Thanks Robert size to be with you today.
We don't particularly like the overall market levels right now.
On a couple levels but we have -- often made money in all kinds of markets and looking at.
Out of favor overlooked -- misunderstood securities and that's what we're doing right now.
-- take a look to have -- got a full screen graphic here like BO looking -- -- no value sort of your.
Strategies here out of favor overlooked misunderstood being the theme -- smaller less liquid stocks cash can be a good position don't -- the market -- and be patient these are all.
We're gonna start here your -- your -- about being cautious right now here.
You guys I mentioned off the top go -- -- kick the tires you meet with management a lot of individuals can't really do that so.
You know aside from me of being like Warren -- -- footnotes and annual reports.
What's a good starting point for individual investor out there.
Well I think for the individual investor who really you know has a full time job in really.
Can't do the the detailed kind of product get -- and kick the tires worked.
I think you construct a portfolio.
Bob perhaps some level of overall market exposure that you can do in low cost ETFs or index funds and then you -- your.
That have a track record.
Of adding value.
In in discrete ways that are not about.
Just kind of broad market exposure but are are much more about.
Investing with a rifle as opposed to a shotgun and that's who we do.
Yeah idea I -- you we talk about you know looking -- for overlooks the stocks here and you and you got fishing where a lot of people don't you hear a lot about people getting in the big liquid stocks.
I know whether we're talking your GD your apple but you know when we've talked you've said in there's not necessarily a lot of value there's a lot of unknowns about those.
And you actually get -- file out of micro cap stocks that are you concerned about the lack of liquidity should you wanna get out -- not -- -- the -- typically -- person who becomes the market in the stock.
So first yeah we think it's very hard to add value by analyzing securities that half the planet is analyzing there's just a lot of information.
In these securities -- a lot of information reflected in the price.
There's not a lot that's unknown so we have to ask ourselves before repurchase.
You know what is our investment edge here.
And we can gain an edge by looking at smaller securities.
Overlooked really out of favor misunderstood.
We travel we talk to suppliers we go visit plants.
And you're right they the the price we pay.
To get exceptional value is a lack of liquidity.
Now investors shouldn't be putting money with us or any other.
Equity strategy in less they have a three year commitment so the liquidity issue becomes.
I think a moot point.
You you in fact end up paying a price to have instant liquidity and we'd rather have the value I mean we travel by personally traveled to India.
Last December to look at two plans of our top holding a company called Tecumseh Products.
Where we believe -- 70%.
It's hundred million dollar market cap lies in a piece of property in Hyderabad India.
That just happens to have -- had an IT.
District -- -- that we think is highly valuable so we think were.
Basically getting that the cost of our investment return to us through one non core asset.
Right that's just stuff -- not -- find out on call over -- gain an edge on.
If you're looking at popular securities.
You know when everybody else is looking in the same place it was.
We'll sort of time the next -- we can you talk like cash being a good position so when you do see pullbacks you're ready to go and it also hear you do not find a market themes -- Benson.
-- certainly the past couple of years and it's an unusual moves we've got markets moving today on.
Just the optimism that China may be stimulating may be stimulus more coming here maybe -- more stimulus in Europe as well what you're saying your -- from.
Really going to the -- level and buying.
Yeah I mean so that the question we always ask ourselves Robert is would we want to own this entire company had its price would we want to take it private.
We are our return was going to be completely dependent on either the cash flows generated from the business or the monetization events that would generate cash.
And if we don't answer that -- -- were not interest and so we're not gonna buy because of fed action.
Notions of -- China growing.
Those are all kind of market driven.
Investment themes and we are a bottom up fundamental investors I think Ben Graham said it best when he said investing is.
Is best when it's most business light.
And it's just not business like to be investing in front of fed actions or.
You know GDP growth rates coming out of China right.
It's just not what we do.
-- -- that you talk about being patient as well and into a large cap stock that you got and it got clobbered not too long ago.
Is Dell side.
It's also a bit more about the thesis here a lot of people look at PCs that he -- a commodity.
We've heard you know some hedge funds out there shorting the PC component makers -- PC makers.
What is it about us company like Dell that's it seems to have value at this level.
Sure sure so over our fourteen year history 70% of our purchases have been in the category of like to come -- And roughly 30% in the category of -- -- A liquid.
Highly hated stock.
That's really out of favour now what do we see there.
Right off the bat you hear -- you see -- stock that is universally hated so that might be a good starting point Dodd to believe that there might be value there.
-- short and we got into this very recently it's a modest position.
At ten dollars a share right now you've got two dollars a share in cash net cash -- you -- Pristine balance sheet.
So takes -- down to an eight dollar enterprise value.
And street estimates for the next two years are kind of a dollar 75 so are you talking about four and a half times.
Earnings -- cash.
But what I think is often misunderstood his two thirds of Dell's earnings -- -- in fact coming from non PC.
Businesses either services software.
You know that things that are not being driven by the the PC sales so so two thirds coming in non PC sales.
A pristine balance sheet right and Michael -- CEO who in the past three years four years -- Added about a half a billion dollars of open market purchases to his already 10% position.
What Jim we're gonna have to have -- -- talk a little more more about balance sheets and in avoiding sort of that the debt bombs that maybe are out there.
Some people don't notice but thanks much for joining us to talk die you're investing -- rebel -- rebel asset manager joining us from Washington.
Thank you Robert.
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