I am glad you have set up this thread at the right time.
I bought put option on DELL around 145-150, thinking this
may be a top at least for a short term. But I has not
read the split news until after pushing the button. :(
I try not to use NSCP and IOMG for comparison to DELL. This is
because both are niche co. (at least then) and the valuation
depends highly on the perception of explosive future growth rate.
As Ben Graham said, it is very hard to value a very high
growth stock and the current PE is almost irrelevant. I once got WIND
two years ago at $6 (before all the splits). I remember it always
has had a PE of 80-90 until today.
But DELL is different: It deals with commodity - PC, and who can claim
commodity products do not have product cycles? I compare
DELL more to MU which also produce commodity products. In fact
MU has a similar chart like DELL in 1995, and the MU earning growth
before 1996 had always been 100%+! I remember MU surged from
$50-60 in jul-aug to $94 high in mid september, '95 also based
on no "news": It is hard to believe nobody know about DRAM
oversupply at the beginning of the third qtr!
To me, DELL is no Microsoft who has something the competitors
simply can not match for a long time. DELL's secret
to success is well known, so it is hard to imagine the big
guys especially like Compaq can not do the same in reasonable amount
of time. Is six month enough? If so, as a predictor for future
performance, DELL stock should start to drop sometimes this
quarter. Right now it is the momentum players pushing it (with
the split effect of course) with a greater fool theory. With
that in mind, I will put $85-90 as the high. I am not even
including negative events like inflation, slower economy
(i.e. slower PC sales), or a general market fall.
btw, I admire the discipline of the people who kept holding DELL
as it multiplied this year, resisting all the temptations for
profit...
regards, Keith |
