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Hey Chuzz:
Although I know you and I are holding long-term (absent of any large change in the fundamentals of the company), for kicks I like to come up with short-term scenarios for the stock/market overall...Would love to know what you think:
Interest rates: I can not fathom the Fed raising rates on Sept. 29 or earlier.....I reckon Nov. at the earliest (if at all)....Asia is going to take a while to sort out...Greenspan has admitted that the situation is delicate, and the world is not (yet) so experienced in knowing how/when these things sort themselves out. Obviously, this is great news for the market overall, and, IMHO, pretty much kills a major correction scenario this year (although, I think a major correction could happen later in the year if the rally I see coming is overdone on the upside)...I am only a casual watcher of interest rates (do not have a background like Lee or others), but I am rather confident that we will see a continued trading band (6.0-5.70) or , more likely, a slight downward drift in the 5.3-5.7 range. Commodity prices show no upturn in sight, oil is in a long-term downward drift, and unit labor costs alone (which will continue rising, albeit at a steady pace) will not be enough to ignite inflation in any significant way. GNP growth will slow....
(Overall) Corporate profits: I think we will see an improvement over first quarter, in the range of 7% for the second quarter, but i think the second half of the year will be better (around 10% each), although probably not as big an increase as the analysts are counting on....
Asia (strong dollar, slower regional sales) will hurt companies like IBM, HP (although, of course, many companies will conveniently blame Asia for their entire problem in succeeding quarters, easy scapegoat), and their stocks will feel the pain. Pricing competition/Labor costs will make the profit environment a continued challenge for many companies, although moderate-strong US/Europe growth will save many companies butts.....
Conclusion: The stock prices of companies that make or exceed their estimates will benefit/those missing will get hammered big....
Some general market comments: Things are setting up well for a summer rally....Liquidity is strong, and managers are holding more and more cash, markets trending lower, going nowhere for a couple months now (with still more time to go).........Sometime in late-June to mid- July, investors will wake up and (1) feel more confident (although not as much as in Jan.), that Asia is not going to bring the world to its knees, (2) realize "Wow, interest rates are at 5.7% and not going up anytime soon, (3) any warnings from computer makers, others in tech industry for 2Q will be on the table, and most (if not all) companies related to the PC industry will be talking up that 2nd half will be showing strong growth, (4) We will have gone thru a 4-7 week period for Dell which will be boring, trading range stuff...similar to the late Feb.-early April period (5) Dell will announce that business is strong and will get stronger in 2nd half (either in an analyst meeting, or latest at the annual meeting), boosting investor confidence (6) Other investment options (bonds, Asia, or Europe (after its long run-up this year) will not be a viable alternative, and money on the sideline will have to return to stocks....Overseas investors (especially Asia) will continue to send their investment dollars to the U.S....(7) On a cyclical basis, tech stocks have rallied in late summer, 2nd half of year the strong part for PC manufactures, others....
Dell's stock price: (From now until late June/mid-July) I see a downward range of 80-75, with 75 being the extreme....barring an announcement that Dell can't meet the quarter, I can't see Dell falling below 75, I believe their are too many muni-fund managers, others who would come in at that pt. and support the stock until earnings....Until late June- early July, I see Dell trading mostly in the low to mid 80's (with a high of 86/87), although it could dip a little into the 70's...Bad news in the PC industry will hit the stock for occasional daily losses, but not as bad as in the past....investors are realizing more and more the disjoint between CPQ, HP, IBM and Dell.....
After late June-July: I see a nice run-up to earnings to a range of 100-110, after next earnings Dell will start the trend over again, but will hold the 100 base....Past 4 Quarter PE will not get above 70/71 this quarter.....A few momos who wanted a absolute big blowout last quarter will stay away this quarter, so Dell will not reach the 75/76 PE range this quarter (that was reached last quarter).......so, I see the high of the rally from 100-110
(this is my unscientific, gut-feel guess)
Earnings for quarter: .47 (Growth will continue strong in all areas, but Asia growth will drop to 20-25%)
Nasdaq: Will stay flat, drift lower to a base of about 1730-1740 until mid-june, a powerful 8-10 week rally will bring it up to low-mid 1900 by late August......
Well, how's that for a little speculation..........Like I said, I am not basing my investment decision on this scenario, just something to do while I wait for Dell's next up move........Also, the NBA final might turn out to be the best ever.........Utah in 7......
Would love to hear your comments.... |
