The market's mentality may be on the verge of changing...if it already has not done so. What historians refer to as a paradigm shift. During the past 4-5 years, the market was driven by a mania that probably occurs every 50 years or so. Everyone knows that this market pace is unsustainable. Perhaps, the recent weakness in the market is just a momentary hiatus, but I'm starting to think otherwise. Value will be the main focus in the future where p/e ratios and the like, no matter how outdated a concept, will be important. During any time of uncertainty, investors go back to value.
Dell's rise to glory coincided with the market "boom"; thus, Dell's stock got handsomely rewarded. Yet if we are about to enter the value conscience era of investing, Dell's stock might falter, and then only slowly rise as earnings steadily increases...gone are the days where Dell's stock rises 300% in one year.
This could explain why CPQ has been doing well the past several weeks. Investors see CPQ as a better value play while they view DELL as overvalued or at least richly valued. Perhaps, the only reason why DELL hasn't gone down further is because investors still have "faith" that DELL beats earnings and continues to grow at 60-70%. If DELL announces poor earnings or a poor outlook, DELL investors are F&^CKED. Hopefully, DELL announces good earnings since it will help the general NASDAQ/tech sector and the fact that I currently own both CPQ and DELL.
Either way, I feel that CPQ is the better stock to own. Dell's growth will slow as it has been the past several quarters. Furthermore, Dell doesn't really sell anything special...they just make it cheaper. Thus, the current valuation on DELL given their current earnings is probably near its peak.
Remember...JMHO.
-Eddie |
