Dell, VMWare and the Biggest Investment Mistakes I Have Ever Made

The biggest investment mistakes that I have ever made all have one thing in common, whether they have involved being long a stock or failing to be long a stock, or shorting a stock.

And, that one thing has been to stay with an investment after discovering that the circumstances upon which my original investment premise were made have since changed (for whatever reason).

Instead of recognizing the change and getting out of the position, I’ve stuck with it, tried to rationalize how the change doesn’t affect my underlying thesis. What I most certainly should have done was admit a mistake and moving on.

I almost made the same mistake again yesterday.

I had previously been a shareholder in EMC and following the Dell acquisition I had not only held, but added to DVMT, the VMWare tracking stock.

The investment made sense given the extraordinary power of VMWare, its great balance sheet, and its CEO Pat Gelsinger.

The investment seemed to make more sense given that Dell was reportedly considering acquiring the share of the company that it did not own last week.

Then, came CNBC’s report that Michael Dell and Silverlake have decided to pursue a reverse acquisition whereby VMWare would acquire Dell. A reverse acquisition, of course, serves Dell and Silverlake very well, moving their lousy 1990s-era business and debt-ridden balance sheet into a pristine one. It is an evil and sick thing to do to VMWare shareholders.

But, this is the nature of the Trumpian world that we live in now. It is everyone for themselves, and that definitely includes a failed billionaire computer manufacturer and a private equity firm.

Rather than try to rationalize this change in circumstances and risk riding DVMT and VMWare to a fraction of its current price, I sold VMWare for a loss as soon as I saw the CNBC report, thereby potentially avoiding a catastrophic loss.

VMWare was at 77 then. It is at 70 now. Dell and Silverlake wouldn’t care one bit about taking it to 30 if it served their own needs.

At least I have learned from my mistakes.