I sold at a decent profit five deep in the money Banco Santander Jan 2014 strike 5 calls bought in April when SAN was near its lows. I did not like the fact that the calls are not adjusted when dividends are distributed. I thought they would be adjusted like it used to be in the past and that is one of the reasons I bought them in the first place. Since that did not happen I sold them, I prefer to have stocks. With regards to my Santander shares I am taking all the dividends in the form of new stocks, that has helped to reduce the average buying point substantially and has avoided dilution.
I exercised one Dell strike 7.5 Jan 2013, that I bought in August 2011 for 6.56. The call was replaced by the equivalent 100 Dell shares bought at 14.06 (7.5 strike + 6.56). I thought the company was undervalued then and I think it’s even more undervalued now so I keep adding. Dell is the only company I have been seriously focusing my energy on and buying in the last few weeks. I re-started looking at it deeply once again around the time I wrote Some Thoughts About Dell. My conclusion is that the current fear surrounding the company is overblown. I added specially today to celebrate its new multi-year low :). It’s among the few companies I have added to this year and will probably continue to do it. I bought it also for my mother in law. I did not like to have a call deep in the money soon to expire losing the newly announced dividend. Not when I am buying stocks anyways. It was not economically interesting to keep it, so I exercised its option to buy some more shares.
Most of the companies I bought or added to this year have been in the technology area. The only exception being Tesco (a UK retailer). In the following links I talk a bit about the companies I refer to: Tesco, Applied Materials, Cisco and Western Digital. Tesco and Applied Materials are the only new additions, the others were big additions to small positions that I already had. Even though they have all gone up they still seem quite cheap so I might keep on adding.
Finally I sold my five American Express stocks at a decent percent profit but very little in absolute terms due to the small position. It was a minuscule position that I bought before the 2008 crisis when I had less money and even less knowledge. After buying the stock it dropped more than 60% to the low teens and it seemed then quite undervalued so I kept it. I never added near its lows because I concentrated on several other opportunities I knew better. Anyways until recently it was not interesting to sell and I preferred to wait for its recovery while collecting the dividends. Another reason I sold is that it seems it’s near fair value and I do not like to have small positions in such conditions. I felt I did not know well enough the company and my time is dedicated to study what I consider are better opportunities. I also have my doubts about how sustainable the card business is, specially when I see what is happening with new players such as Paypal. Anyways the company seems quite good but my problem about having small positions is that they may do more harm by not focusing on them or detracting attention than the small benefit that they bring due to the added diversification.
PD: Interesting interview with Dell’s CEO: Michael Dell: On his company’s end-to-end solutions transition, new tech trends & post-PC era
Here is an excerpt: If you look at the IT market, there are about 10 companies with more than one per cent of this 3 trillion and one per cent would be 30 billion. So about 10 companies and we are one of the 10, though we are the only one that is focused on the 2.75 trillion who don’t have the legacy of old stuff. Even though we have 5,000 patents and strong intellectual property, we spend a billion dollars a year on research and development. We have $50 billion in cash and so we have resources, we have asset capabilities and we can really be the next generation of end-to-end solution provider.