HDL- You certainly have done a good job in presenting partial doomsday arguments concerning Dell (the company, the stock)..If you probe a bit deeper, however, most of those don't hold up so well...or there exists a quick retort..
(1) "High PE"- PE's are overrated in valuing a company...looking at PEG (price/future growth rate)...that what analysts (on Wall Street do)...to say Dell's PE is too high...is a meaningless statement...you must look at it relative to its growth rate (earnings/EPS)...Now, compare that to the universe of stocks (investment alternatives)...and we can begin that discussion...Hint: Relative to S&P 500, other tech stocks, Dell is still cheap..by a good bit
(2) "ASP's have been inexorably falling"...This has been covered, ad nauseum, on the thread (as you well know)...Sure, this means that, as a company, you have to branch out into other areas to maintain (rapid) profit growth, but Dell has done that...has done it successfully...and maintains a large amount of opportunities to do so for the forseeable future (services, storage, consumer & international sales) etc...BTW- ASP trends have changed a bit lately (have you noticed?)....Regardless, Dell has been extremely successful in this challenging enviroment (lower ASPs), look at the last 2/3 years results..
(3) "Young management may not continue outstanding performance"- Young???? Michael Dell has been around longer than any other CEO in the industry (by far)...oh do you mean his REAL age? Is this even a relevant argument???
Would you rather have a bunch of OLDER guys with NO industry experience???
(4) "Interest rates & inflation may go up with a negative effect on the stock". Agreed (however, there is a lot of data to support owning fast-growing tech companies (stocks) in a rising interest rate/inflationary enviroment...talk to Sam Stovall of S&P)..
(5) "No Dividend to cushion the fall"- This has been most(ly) disregarded as irrelevant....Stocks are valued for their stream of cash generated....it is unnecessary for companies to distribute their cash in the form of dividends (not even speaking of the tax consequences of such) to increase the value of your investment...Cash generated by Dell is owned by me (even if they keep it)...by letting them keep it, I am trusting (and look at their ROI !)...that they can do a better job in investing it (than I)..So far, hard to argue that they don't know what they're doing (investing cash generated by the business)......
(6) "No profit if you included stock options"- This is an interesting point we should explore in greater detail..
(7) "Computers are commodities/foreign companies will rule"....Man, you are a negative sort, aren't you? Uh, the same conditions (for the "computers are commodities" argument) have existed for quite some time....so, if you are right, that computers are commodities (and they obviously are NOT pure commodities, but we will save that discussion)...THEN Dell is doing extremely well with computer as pure commodities.....Your "foreign company argument" is just plain silly...There is no inherent reason why foreign companies are better than this..and one must go on a case-by-case basis....
(8) "Dell doesn't have the assets, patents, etc." In fact, yes they do...both, in house, and thru relationships with suppliers (IBM, others)...I guess you haven't seen the numerous posts on these threads concerning Dell superior quality (in manufacturing, service)...
(9) "Dell assets negligible to market cap"- IRRELEVANT.....The only proper way to value stocks is as cash-generating machines (like bonds...the main investment alternative)
(10) "What goes up, must come down"...The rest of your post was primarily ranting on a bear that hasn't been fed in a while.... |
