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Technology Stocks : DELL Bear Thread -- Ignore unavailable to you. Want to Upgrade?

To: Mitchell Ryan who wrote (1682)	8/30/1998 1:12:00 AM
From: Bilow	Respond to of 2578

Hi Mitchell Ryan; About that INTC/IBM PC on a chip attempt back in 1992. I suppose they were early. We have a phrase in the trading business. There isn't much difference between being early and being wrong. :) But times change, and what was not once economical may become economical due to technological change. The changes I am predicting are obvious to anyone in the business, as they are simply the continuation of trends that have been in place for two decades already. To suggest that these trends are going to halt or reverse at some arbitrary stage is harder to believe than what I am predicting. In all probability, PCs on a chip have to eventually happen. The discussion should be about when. I think soon. There are intelligent reasons to believe it will take longer. But the evolution in PC manufacturing will continue. "Good luck if you're basing you investment decisions on levels of integration that in all probability will never happen." This statement assumes I have made investment decisions regarding DELL as a result of my observations of where the PC industry is going. But the only decision I've made is to not be holding DELL long term. On the other hand, I sold all my overnight holds a few weeks ago when the market looked nasty. (Okay, I still have 100 shares of LPWR.) I'm also not short DELL, though, of course, you'll just have to take my word for it. I've been buying DELL as a daytrade on break outs to new highs for 4 months now. For instance, I posted to that effect just this past week: Message 5589084 I also short DELL as a daytrade, though not as much due to the uptick rule. If you will look through my posts on DELL, I have not made many predictions as to what its share price will be in the short term. In fact, I expect to see very good earnings posted over the next year, but this does not always result in a higher share price, particularly in the environment of a very high P/E and what appears to be a bear problem for the market in general. I also caught a whole lot of flack on this very thread for suggesting that DELL's method of valuing options granted to its employees was correct, so I am hardly a rabid DELL bear: Message 4633792 In other words, I am a more disinterested observer than the majority of the DELL posters here on SI. Why do I spend time typing in these comments? It's hard to psychoanalyze oneself, but I think its because I like the intellectual company. It is hard to find people who really are interested in where technology is going, what is happening financially, etc. I am also looking forward to saying "See! I told you so!" at some time in the (2-3 year) future. So much for an analysis of my investment decisions. Lets take a look at the decisions of the people who are buying DELL for the long term. Over the past year, DELL has quite nearly tripled in price. This is a 200% increase. Yahoo shows sales and earnings up 51% and 54%, but since DELL has bought back shares, per share amounts are up somewhat more. I don't have the numbers right before me, but I seem to recall it is something under 70%. So the stock has gone up three times faster than the fortunes of the company. Suppose DELL dropped to the P/E it had one year ago. I would think it would be around $75 per share. Nevertheless, people are buying DELL at around $120 in the current market. It is possible that we have seen a major bottom, and the DOW will hit 10K in September. But right now, it looks to me like preparation for a panic which has not yet happened. I could be wrong. But since I am a daytrader, my long term prognostications don't enter into my trading. I try to trade with the trend, not with my expectations of the trend. But what happens to the guy who buys DELL at $129 with the expectation that growth will continue forever, and will therefore eventually bail out his position, even if the stock returns to a lower P/E? My analysis suggests that it is possible, (though not a sure thing) that DELL will never again see that price. All that has to happen is for DELL to return to the P/E it had a year ago, and cheap computers to hit the market in the winter of '00. No revolution. No atomic war. No economic disaster. Just return to the P/E of August, 1997, a very good month for the stock market. Then, around the time DELL's "E" growth starts to get the "P" back up to the $129 range, it becomes clear that DELL is behind in the race to produce cheap, high quality computers. And lower margins drive the "E" down. And then the P/E falls, due to the decrease in "E" growth. DELL could easily see 1/6th its current price, even though sales would be up double from current levels. Then the high end business computer market segment contracts, and DELL never increases earnings again. And that long term investor who doesn't understand technology is still holding when MUEI buys DELL at the bankruptcy auction. (joke!) In any case, best of luck, and thanks for taking the time to respond. -- Carl