Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (66655)	9/22/1998 1:36:00 PM
From: Stewart Walton	Respond to of 176387

Lee, Great post. I am particularly impressed with the last paragraph, which I think perfectly summarizes the bear argument. This should be sent to every new bear to save him the effort of mining the thread, and to save him some money betting against Dell. Probably the worst assumptions made are the assumptions (1) that Dell won't grow market share, (2) that the Dell model can be readily emulated, (3) that new markets aren't opening up, (4) and that Dell can't evolve it's business into concurrent parallel technical pursuits. Regards, Stewart

To: Lee who wrote (66655)	9/22/1998 1:37:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Good morning Lee, Thanks for reposting Dorrine's wonderful link. Everybody parrots the common line that S&P values are excessive; however, it is never repeated in the context of current rates and inflation, only according to historical norms. Yes, and that's why I like to invert the p/e to talk in terms of yields. If investors would begin to think in these terms they would get much less jittery. Let's just try an exercise. Let's suppose that we estimate that Dell's earnings will be $2.50 over the next 12 months. Given a stock price of around $60, this gives a projected earnings yield of almost 4.2% -- not too bad when you consider that the company is growing rapidly, and that one of your principal alternatives, bonds, yield a little over 5%. So how do you analyse it at least qualitatively? Here are the tradeoffs: 1. The return is not assured --> there is risk. The greater the perceived risk to earnings (i.e. the chance that earnings projections will be less than forecast) the greater the yield the investor will demand; 2. Growth is assumed --> The greater the assumed growth, the lower the current yield, because investors are deferring current income for future growth. Maybe if some "analysts" would begin to think about stocks in this context we might have a more rational context for discussion. TTFN, CTC