Jim, thanks for an excellent analysis of Dell. I agree with all you've said, but we should all bear (no pun intended!) one thing in mind. DELL is a momentum stock, and one slip, or a rumor of a slip can send the price plummeting.
The underlying problem as I see it is that we simply don't have a good way to value growth companies. I've posted at length, so I won't rehash my arguments here, that PEG and YPEG valuations don't make financial sense. It's certainly true that companies with greater growth should be valued at a premium over those with lesser growth. But we're still faced with two problems. First, how much of a premium, and second, we've begged the question of how to value the company with lower growth.
I don't mean to sound like a bear (especially since I'm long DELL), but we need to couple the issue of Dell the company to DELL the stock in some meaningful way. Practitioners of Modern Portfolio Theory contend that a company is worth what the market says it's worth, and while I tend to lean towards that point of view, I really yearn for some sort of objective mathematical underpinning for growth stocks.
Any thoughts?
Regards,
Paul |
