<Usually stocks split because the price is too high,
because earnings are coming in....Did fund managers sell
INTC and MSFT when they split before??? Respectfully,
I beg to differ...>
Yes they did. For MSFT, check out last year. For that matter check out Dell. It, too, declined dramatically after its split. It did go up about $4 in one week, but it was just moving with the rest of the market. Thereafter, it declined from $49 to $23 in two months.
< vickers report for one of the top 10 stocks with insiders
selling--any insight thank mike>
Of course, insiders are selling. They know a good price (to sell, that is) when they see it. Why not take advantage of an opportunity while it still exists? If someone offered me $500,000 for my car, I'd sell it to them. I'd be a fool not too.
<As far as the insider selling, Michael Dell as of the
annual report owned around 16% of the outstanding
shares. According to my calculations that puts Mike at
1.6 billion dollars. I do not know where I saw it but as I
recall he sells shares every year on the order of 2 or 3
times a year. Also other directors sell with a similar
frequency. This has gone on for years.>
Yes, but ask yourself this. Why are they selling now, if they thought the price was going to go higher soon? Do you think maybe they know something that you don't? Would it make sense for them to sell now if the price was going to be $10 higher per share a month from now?
WSJ reported today that stocks and bonds may retreat, especially if the job report is strong today. There was a strong sell-off in bonds just as the market closed, raising interest rates.
To the various arguments why a stock will appreciate after a split: Look at the evidence! Whatever arguments you want to adduce about price appreciation after a split, historical evidence confutes it. Just look at Dell last year at about this same time last year. Yes, sometimes it does go up after a split, but it mostly declines. This is because by the time a stock splits, it has already run up in price, and, a fast price increase is almost always followed by a correction. Yes, there will be a few small investors who will buy after the split, but it's the fund managers that influence the price, since they have most of the money, and, with their billions of dollars, they don't care if the price $50 or $500. They do look at fundamentals, however, and fundamentals don't change with a split.
Regarding Gateway 2000: It is true that Dell has done a little better than Gateway, but you got to remember a couple of things: (1) It's a smaller company, so they have greater potential for growth. (2) They are making major headway selling to large organizations. In fact, they recently received recognition for being the largest computer seller to the government. (3) They are starting to enter the server market in greater force with the help of Intel. (4) They also sell more computers to the home market. While the home market is not as profitable, it is a much bigger market than the server market.
Future profitability: Both Gateway and Dell said that their increased profits resulted from lower component prices, especially memory prices. They crashed! Now they are stabilized. They will continue to decline in price, but it will be more slowly, and with increased competition from the Japanese, computer makers will lower prices more quickly when component prices fall to maintain market share, thereby reducing the opportunity for profit that they had this year. It is asinine to think that computer makers are not going to face increased competition and lower profits in the future. Remember, too, that the PC sales growth rate was 25% last year compared to 20% this year, yet the computer stocks still lost more than 50% of their value last year!
Finally: As I said before, DELL may continue to climb. I am just presenting other possibilities for newbies to consider before they buy into a potential top, and even if this were not the top, Dell has to be damn close to it, at least for the next few months. As I said before, the higher the stock goes, the less upside potential, and the greater the downside. And a high p/e stock will respond to even a whiff of bad news, whether it be about the company, computers in general, or about the economy, including interest rates, which seem to be heading north. |
