Anyone who paid attention to suggestions that EMC was ripe for a takeover, invested when it was $22 a share and sold today (October 12, 2015) at $28 a share. CNN Money reports on the largest tech deal ever, the purchase of EMC by Dell and the Silver Lake private equity firm.
In the biggest tech deal of all time, Dell announced Monday that it has agreed to buy corporate software, storage and security giant EMC for $67 billion.
The deal completes Dell’s transformation from a consumer PC business to an IT solutions provider for companies. That process began when Dell bought Perot Systems for $4 billion in 2009 and went full throttle in 2013 when company founder Michael Dell took the business private.
EMC is a behemoth of a corporate IT business. It is among the largest providers of storage hardware in the world. It also makes servers and owns security company RSA, which is known for its hard-to-crack SecurID tokens. And its most prized possession is its 81% stake in VMware – the company that rules the world of virtualization software that allows businesses to run various operating systems on their devices.
EMC has had problems as cloud services have enticed customers away from their data storage services. Thus the stock had fallen. The prospect of a buyout has resuscitated EMC stock. Interestingly it has hurt VMW (VMware) stock which fell from $80 to $70 on the news of the buyout. This situation brings up the issue of which stocks to watch and where to look for information.
Stocks to Watch
The Wall Street Journal suggests a few stocks to watch; EMC, Eli Lilly, Staples and Office Depot.
Among the companies with shares expected to trade actively in Monday’s session are EMC Corp.EMC +0.97%, Eli Lilly LLY -8.17% & Co. and Staples Inc.SPLS -0.12%
Dell Inc. and private-equity firm Silver Lake will buy EMC for roughly $67 billion in cash and stock, marking one of the largest technology-industry takeovers ever.
Eli Lilly said it is ending development of its experimental drug for high-risk atherosclerotic cardiovascular disease following the urging of an independent data-monitoring committee because the treatment wasn’t effective enough.
Staples and Office Depot Inc.ODP -0.30% said they agreed to a Federal Trade Commission decision to extend its review of Staples’ planned $6.3 billion deal to buy its office-supplies rival by nearly two months.
The Journal routinely publishes a list of stocks to watch based on expectations of active trading. However, once trading becomes active much of the profit may have been removed from any given stock. A better way to find stocks to watch is to look for depressed P/E ratios, falling stock prices and other indications of companies that are in trouble or simply undervalued. Then one can use the Warren Buffet approach: find out what the company does to make money now and in the future. If that business plan indicates that the stock is undervalued then it is time to buy. This is the analysis of intrinsic stock value.
In the aftermath of the stock market crash of 1929 in the early days of the Great Depression Benjamin Graham introduced the concept of value investing. No longer would those buying and selling stocks need to act like they were at the casino. With the concepts of intrinsic value and margin of safety Graham taught investors a rational means of investing in stocks.
This concept has been around for a long time. Those who apply it to their investing tend to profit and those who ignore it tend to lose, especially when the market crashes. When you generate a list of stocks to watch use the concept of intrinsic value to analyze whether or not these stocks are good investments.