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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (356)	9/25/1998 1:05:00 AM
From: peter michaelson	Read Replies (1) \| Respond to of 4691

One aspect not mentioned is that Dell's computer's are pretty expensive now. When they began they were the among the cheapest and offered custom configurations delivered very quickly, excellent service and support. Seems to me the custom configurations are limited now as they will only supply a very limited number of manufacturers' parts (I think it was more open in the past). Most important, compare their 400MHz machines with any local vendors. They're a good $300 or 15% more expensive. And remember, the computer is as good as the parts in it (which Dell does not make, patent or design) and the service backing it up. Not my kind of company - they're more like the IBM of the 1980's - people buy their product because it's perceived as risk free - but you pay lots for that. They're no less expensive than an HP, IBM Compaq machine anymore. Some of the above phrases may sound as if they're factual, but it's only that I think they're factual!! peter

To: James Clarke who wrote (356)	9/25/1998 1:00:00 PM
From: jhg_in_kc	Read Replies (1) \| Respond to of 4691

Thanks for the kind remarks about my "best Dell bull post." But here is one even better. The author is my Dell guru, Chuzzlewit. Here it is FYI: As the international financial crises have unfolded, Dell, owing to a vastly superior business model has been able to profit at the expense of its rivals. In fact, the evidence is becoming clearer each day that the competition is seeking ways to avoid competing with Dell. Dell has accomplished this by taking advantage of the rapid deterioration in prices of subcomponents -- an advantage that its rivals cannot utilize because of systemic inventory control problems. Valuation of the stock is at once the thorniest and easiest of questions to address. Thorny because nobody knows how to properly value a growth company. I have challenged value investors repeated to come up with a decent multiperiod valuation model, and they simply can't do it. But the valuation issue is also easy to address in qualitative terms. Valuation in theory depends on three parameters: the risk free rate of return, the expected future cash flows, and the riskiness of those anticipated cash flows. The reason that Dell's valuation is a function of forward p/e is quite simple. Each of those parameters has improved with respect to Dell. Interest rates are lower, and the risk to anticipated cash flows seems to be quite a bit lower, and Dell's strong showing in the face of recently decelerating demand augurs well for an eventual resumption the rate of increase in demand. Any comments, particularly as to how to determine the valuation of this stock? jhg