Top Mutual Funds Keep Buying Up Dell Longtime Leaders Show Accumulation As They Build Bases
Date: 6/19/98
Author: Leo Fasciocco
Isn't a stock that's up 9500% in five years past its prime?
Many individual investors would heartily agree as they go searching for the next big thing.
But the best mutual fund managers in the business disagree. They know that as long as a company churns out stellar profits, its stock can surge ever higher.
Dell Computer Corp. is a case in point. The most efficient PC maker on the planet traded as low as 7/8 in '93, adjusted for splits. It's now near 84 1/2, a cool 95-fold gain.
And what have the best funds done recently? Fifty-one of them bought another $1.4 billion of Dell's stock. It showed the heaviest accumulation by top-rated funds among the 150 leading issues tracked by IBD.
Dell boasts a 99 Earnings Per Share rank, which puts it in the top 1% of public companies based on profit growth. Its stock has a 97 Relative Strength, meaning it's outperformed 97% of all other issues in the past year.
After soaring from 42 at the start of the year to a peak of 98 1/2 on May 13, Dell slipped into a well-deserved consolidation. The base is now five weeks old. Dell is still holding above its rising 50-day moving average line. That's very bullish.
Dell continues to expand its business aggressively. This month it launched a global advertising campaign. Currently, the bulk of its sales are in the U.S. For the fiscal year ending Jan. 31, analysts forecast a 60% jump in net. Dell has topped Street estimates the past five quarters.
Cisco Systems Inc. was bought by 93 top-rated funds. The networking giant hit a new high of 82 1/2 this week. It has made more than a 10-fold move in the past four years.
In May it agreed to work with Dell and US West Inc. to make PCs with high-speed digital modems that work over telephone lines. This week, Cisco set plans to spend $100 million to expand into China. The Street looks for a 27% gain in net for the fiscal year ending July 31.
Ninety leading funds snapped up Lucent Technologies Inc. The stock is a '96 spinoff of AT&T Corp. Lucent is the largest supplier of consumer telecom products in the U.S. It has annual revenue of $28 billion. This year, analysts see a 45% increase in net as Lucent expands into fiber optics, the Internet and digital signal processing.
The stock is a big winner since coming public at 14 in April '96. It's currently in an eight-week base in the low-70s. The ''A'' rated Vanguard U.S. Growth Portfolio Fund holds a large stake.
Home Depot Inc. was bought by 78 funds. The stock of the building-products retailer hit a new high this week. It doubled the past 12 months. It will split 2- for-1 on July 6. The firm's earnings are growing at 25%. It will open 105 stores this year, giving it 761 by year-end. It's also coming out with a line of smaller stores.
Staples Inc., an office supply store operator, was a key new purchase. The stock broke out of a seven-week base on June 8, cutting through resistance at 26. It has since followed through and climbed to 29. Earnings for the fiscal year ending Jan. 31 should rise 29%. The top-rated Fidelity Contra Fund holds 4.9 million shares at last report.
IBD found 56 top funds buying AMR Corp. New positions in the airline stock came to $333 million. The company is showing accelerating earnings growth due to rising passenger traffic and lower fuel costs. Net rose 2%, 16%, 65% and 96% the past four quarters.
HBO & Co., a provider of computer systems to health-care firms, was bought by 59 funds. The stock has a 99 EPS rank. Earnings this year should rise 38%. The stock pulled out of a 10-week base on Wednesday.
Thirty-eight leading funds purchased $266 million of Providian Financial Corp.'s stock. The provider of consumer loans via credit cards is a spinoff of Providian Corp. Three of Fidelity's ''A'' rated funds were buyers. The Fidelity group holds 9 million shares.
Analysts forecast a 28% rise in Providian Financial's earnings this year. The stock is trending higher after breaking out of a seven-week base at 68 on June 4. It's now near 69 3/4.
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