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Technology Stocks : Dell Technologies Inc.

DELL 132.51

-5.9%

3:19 PM EST

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To: Craig Lieberman who wrote (150759)	1/7/2000 6:54:00 PM
From: Chuzzlewit	Read Replies (1) of 176387

Craig, I think you are making several potentially disastrous errors in your investing approach. For 10 years growth at 35-40%, my portfolio will provide my needs forever. What would $1000 invested in GE stock when it listed was part of the DOW, be worth today? I have no idea, but it is certainly millions. GE grows at 13% per year and rarely surprised to the upside. Yet its stock grows around 40% per year. Take your current position in DELL and multiply by 1.4 about 10 times. (multiply it's value by 28.92) That is its value in 10 years if the stock only tracks its current growth rate. Eventually, the earnings overpower the share price and force it higher even without an expansion of the PE. Given Dell's current business model Dell cannot possibly grow indefinitely at historic rates because the segment that it is in is growing at only around 15% per annum. The excess growth came from capturing market share. As Dell's market share expands, growth must slow asymptotically to the 15% rate. This is sometimes called the law of large numbers. I have also lightened up on DELL to make it only 75 percent of my holdings rather than the full 100%. No company is immune from business risk. Unforeseen events happen that are business specific. Look at what happened to BMCS, LU and VISX over the last month or so. By putting all of your eggs in one basket you are assuming a huge, and unnecessary risk. I would suggest you diversify so that no single holding exceeds 6.7% of your portfolio. That means holding around 15 stocks minimum. Diversification will eliminate much of the risk you have assumed. When is the best time to buy a stock? When it's cheap. But from a practical point of view, few stocks (except some small caps) are cheap now. But you can make a lot of money by buying growth stocks that are fully valued and riding their earnings up over the years. Perhaps comparing the relative PEG of the stock you are considering to the PEG of the S&P500 might point you in the right direction. TTFN, CTC

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