Good! I think maybe we've got a common ground at last. Now people buy because they view the asset as either properly valued or undervalued, right?
But what asset are they evaluating? I contend it is cash flow, and that the metrics used for the valuation are long-term interest rates, perceived growth of the stream of cash flows, and perceived riskiness of that stream.
So, declining interest rates causes the price of the stock to go up. True for Dell as it is for all stocks.
Perceived growth of the stream of cash flows. This is true for Dell, but not for its major competitors, and not for a host of other companies from K to NT. If anything, perceptions are that growth forecasts are understated.
Perceived riskiness of cash flows. The world markets have received a number of jolts and there have been a host of downward earnings revisions. Dell, on the other hand, has indicated that it should not have any problems acieving 13% sequential growth, and that things look good for the future. Translation: investors are feeling more and more confident in the earnings forecasting abilities of Dell's management. Hence, riskiness of projected earnings is decreasing.
Put these three factors together and you have a prescription for potentially healthy price appreciation.
So where's the beef?
TTFN,
CTC |
