DELL 152+ near-term...go on..short it!
If you look at the historical chart for DELL (disregarding the 100 days leading up to February 18, which have little or nothing to do with this stock), DELL is primed to go much higher than many probably believe.
On May 20, 1997, the Board announced a 2-for-1 split to be approved by the shareholders on July 18, and payable July 25. Between May 20 and July 25, the stock jumped from around 52 (split adjusted) to almost 85 (split adjusted). This represented an approximate 39% increase in price.
If we discount the huge increase (Asian Flu) in DELL from the low 70s over the last 100 days (since the stock is really up only from its previous high of 103 to where it is now), and call DELL at 110 pre-earnings, then the stock is really only up about 15% or so since earnings were announced.
This might seem like a lot, but any student (long-term shareholder/ non-trader) of DELL knows that this is not a huge move for the stock. If DELL were to increase 39% from pre-earnings, before March 6th, that would put the price at 152.90. Obviously, the time between May 20 and July 25 was much longer, but it is arguable that the growth and earnings prospects for DELL are even greater now than then. This should propel the stock well. Anyone who has watched this stock will know that if you sell out now, you will regret it. You may have made a bunch of money (like we all have), but you will have missed the opportunity to make much, much more in the very near-term.
In any event, I've been in stock since March 1996, haven't sold a dime, and don't intend to do so within the next couple of years at least. I also trade options, and if there ever was a certain call option to buy, DELL comes about as close as you could want. Stay away from short-term calls, however.
The DELL story is still in the front part of the book. |
