Hi Freeus,
OK lets look at the situation Dell. A/D is a ‘C'.
On Oct. 9 Dell was a ‘D'
On Oct.27 Dell was a ‘D'
On Nov 4 Dell was a 'C'
All through this Accumulation/Distribution as you correctly pointed out we had a 99-99-A- rating.
Which for those of us that would like to know reflects IBD's highest rating for Earnings per Share rank, Relative Price Strength rank and Highest Industry Group ranking.
Folks, as "Freeus" and others, could tell us, they don't come any higher or better!
In addition Dell's Sales + Profit Margins +ROE is an ‘A.
So what is with the 'C', and how are we to view it?
Let us see if this makes sense.
Firstly for those of you that missed the explanation of Accumulation/ Distribution click on :
techstocks.com
Viewing these ratings numerically lets say an A= 80-99, B=60-79,
C=40-59 D=20-39, E=1-19.
A 50 would be a true neutral number, a perfect balance between Buy (demand) and Sell ( supply).
Anything less than a '50' would mean that there was more selling evidence than buying.
Anything more than a 50 would mean that there was more buying evidence than selling.
Logically therefore, the more selling desire, the less the price of the stock.
The more buying desire, the higher the price of the stock.
For the short term we were briefly at a ‘D'. Remember these ratings are a reflection of a weighted moving 13 week comparison of buying and selling in the stock. So we have been under selling pressure for a period of time prior to Oct 9th.
From Oct 9th to Oct 27th we were still under that pressure but it began to ease. In other words buying started to increase. I make that conclusion because as of the Nov 4th issue of IBD we were a ‘C'.
Again because this is a weighted 13 week comparison the favorable increase in buying had to have happened in the later weeks of the comparison rather the earlier weeks(the weighting would give greater mathematical significance to the newer data over the older).
Proceeding from this let us simply the process.
Using the criteria as cited above we will give 'A' a rounded mean number of 90,
B=70, C=50, D=30 E=10.
So now lets look at the same thing using the universal language of mathematics. If we accept these numbers as workable, we see that the 'D' rating of 30 was with us for a short while prior to Oct 27.Then we went to a 'C' rating of '50' in this example in 6 trading days. That means we increased our 'D' base from 30 to 50 or put more importantly, we increased a rounded off 67%!
If we accept this short cohort(six trading days to today and from today, six trading days to earnings);Using C = 50 then this new base,and if experiencing the same prior 6 trading days ( moving 13 week comparison )and if we were to experience the same increase of 67%,we would show 50 X 67%=33.5. 50+33.5= 83 plus.
In other words, if in six trading days we went from a 30 to a 50 than if the situation were the same, we could expect going from a 50 to an 83 plus. The situation may very well be better!
Got the picture? We would be looking at an 'A' Accumulation/Distribution rating on or about earnings time!
My guess is that the 'C' is soon history.
Freeus here is what I think.
There has been a lot that has gone down.
We had the 'Hedge Fund thing' and there are others who indicated that "they' got caught with a lot of Dell, sold off in an attempt to save the 'Fund' etc.
We are informed that there is a heavy body of dollars bouncing around in other areas in an attempt to get a better ROI.
Then there is a strong body of dollars anchored in Dell not moving in or out, in a buy and hold position.
There are some people who would ordinarily invest now who are holding off to see what CPQ's Direct Plan looks like( released on or about Dell's earnings announcement).
All short term stuff. Want Real short term stuff? Try to take a peek at 1999.
Just caught Cisco's take on 1999 Network commitment. You should see some caution from them because of Asia. Cisco is up in after hours. Dell doesn't have that future problem at least in '99. They have other problems. Dell's stock price will advance as it should.
Sometimes we have to remind ourselves that like people, companies will always have problems.
If Dell were to stick to doing the same thing in the same way beyond 99, I think long term they will have really difficult problems. But they are not. Dell is already enacting changes in a changing and fluid arena.
Dell new agreement with NTAP just one example in a continuing series of agreements designed to enhance Dell's expanding position in the marketplace.
I know your investment style, so the best I can tell you right now the company is in very good shape with real challenges and incredible opportunities. Dell is one of the most dynamic of companies, in one of the best investment sectors, available to us right now.
Sincere Regards,
QT |
