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Technology Stocks : Dell Technologies Inc.

DELL 124.29

-2.3%

10:18 AM EST

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To: Gabriel008 who wrote (63894)	9/6/1998 1:57:00 PM
From: Chas	Read Replies (1) of 176387

thanks for the post, the option newsletter view on Dell, I would appreciate everyone's feedback on this guys view:-good trading ***************************************************** DELL Computer $109.50 (-9.25)(+1.27)(+11.88)(-1.63)(-1.35) Post split price $54.75 Surprising strength from Dell on split Friday. After being down -3.31 mid-afternoon Dell roared back almost +$5 to close positive. This has made us wonder if maybe the -$20 drop from the high last week of $129 flushed out all the profit takers and split traders. To substantiate this thought we researched the recent volume and found that 335 million shares had traded since 8/20, the first day of the current market weakness. This is over half the outstanding shares of 660 million and an enormous amount. Furthermore since the high of $129 on 8/26 more than 259 mil shares have been traded. The theory: After the high on 8/26 and the market weakness that followed the momentum players ran for the fire escapes taking their profit and 250 million shares changed into new hands at bargain prices around $100-$110. The fallacy: While this sounds good and even may be correct the fact remains that current holders will have a new "dividend" share in their accounts on Tuesday. Stock dividends have special tax consequences for corporate owners. (less taxes) Corporate owners can sell their new shares without the normal heavy tax trigger. A large number of retail investors also see the new shares as an windfall profit opportunity. They can sell the new shares and six months later the old shares will appreciate back to the old level another split occurs and they get to do it again. (I did not say this was rational thinking but many investors take this short sighted approach. Any rational investor would realize that they are killing the greatest profit opportunity in the world by removing the duplication opportunity. If the old share will appreciate back to $120 and split again so will the new share. And so on, and so on.) Now for the really hard part. What will Dell do this week? I could take the easy way out and drop Dell as a pick for a couple of weeks but I can't bring myself to do it. I am (in case you haven't noticed in the past) STRONGLY BULLISH ON DELL. This does not mean it will not go down this week. If you read the commentary you know we are expecting a strong week if Latin America does not explode in our face. If we get a strong week the money on the sidelines will come into the market looking for the best stocks with the strongest growth potential. South America is a new market for Dell and ANY business from there will be new business. Latin America cannot impact Dell significantly. New money + cheaper stock price + strong growth prospects = buy Dell. If the new money coming into Dell offsets the "free share selloff" the Dell will go up. If we get more weakness in the market Dell will go down as people take their profits. (+$25 from the price 60 days ago) I am going to urge caution in opening a new position in Dell this week. Even if we get a bounce from the market for a few days there is still the lingering profit taking problem. If you start a new call position you either need to maintain your stops very closely or buy several months out and close your eyes for several weeks. I tried to layout the pros and cons but of course it is up to you to decide if you want to play this week. Post split depression is real and impacts 95% of stocks that split. Dell of course is not an average stock. Prices are estimated based on closing prices of the old strikes. BUY CALL SEP-55 DLQ-IK estimated price $3.38 BUY CALL NOV-60 DLQ-KL estimated price $5.50 BUY CALL NOV-65 DLQ-KM estimated price $3.63 If you want to play the post split depression possibilities: BUY PUT SEP-55 DLQ-UK estimated price $3.75 BUY PUT SEP-60 DLQ-UL estimated price $7.00 Picked on Jan 18th at $24.22 PE=65 based on 1999 eps $2.10 Change since picked +$30.53 52 week low =$17.50 (split adj) Analysts Ratings 10-9-9-0-1 52 week high=$64.75 Last earnings 8/18 est=.23 actual=.25 surprise Next earnings 11-17 est=.265 versus=.17 increase Chart on DELL quote.yahoo.wh News and Zacks on DELL quote.yahoo.com

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