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Technology Stocks : Dell Technologies Inc.

DELL 124.79

-1.9%

9:35 AM EST

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To: freeus who wrote (20091)	10/31/1997 12:53:00 AM
From: Jonathan Rothschild	Read Replies (3) of 176387

Dear Freeus, Dell's PE has been held up above 40 by momentum investors who don't care about value, only direction. Now that it's down, Vinik and momentum investors like him are bailing (see Business Week article of two weeks ago). In summary, Vinik busts the shorts, bails and stocks drop precipitously. These are not the type of stocks you would want to buy on margin at their highs. I've seen this before. These stocks can drop by two thirds within a month under these market conditions. Dell is no exception. It was the premier momentum stock of the year, but has no competitive advantage over its peers in the industry. The direct channel was a great story for the Harvard Business Review, but has been copied by everyone. This is fundamentally a low-margin business and these stocks should not sell for more than 1 times sales. Dell has at least another 40 points to drop before we see any real stabilization. The split was just hype. Novellus and Applied Materials are suffering a similar fate after recently splitting. Good trading and good luck.

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