Buffetting (90.73)

Added a few more

October 05, 2008 – Comments (0) | RELATED TICKERS: DELL , TSS , GE

I've added a few more picks which are pending for Monday.  One of these which may seem more controversial (rated 2* on CAPS) is DELL.  As my explanation isn't yet visible on the DELL Screen .... here's what I had to say and why I like it:

What a great time to pick up DELL. Here's my take:

1. Liquidity: They can pay off their LONG TERM DEBT in less than 2 months based on earnings.
2. Share buybacks: In the last 10 years, they have repurchased 400000000 shares. They still have alot outstanding, but buy-backs are good :)
3. Average ROE for the last 10 years: 51% **This is amazing**
4. Average ROC for the last 10 years: 19% **This is excellent**
5. Not so relevant for this company, but ROA for the last 10 years is 13%, very good.
6. Mainly rising EPS in the last 10 years. Dropped 2001-2002 (understandable) ... also dipped 2007 but bounced back in 2008
7. Based on my estimates ... this stock will do anything between 2* and 8* based on current price ($15) over the next 10 years. Even if it's 2*, i'd take it.

RISKS:
1. Short-term risk: worldwide recession. Less people to buy computers. This could be countered by some fancy new product lines such as their "Hybrids" (will appeal to the 'less cables' and other people who dont want a computer bulking out living space) and "Slim" desktops. Recession may be a factor over the next 12 months or so and this stock could dip further (making it more attractive long term)
2. Part of their durable competitive advantage is massive sales on slim margins with excellent service. Competition may start to rise up out of developing markets
3 More concerning long-term is their change in sales model from direct sales to channels. I'd like to think this was done to increase sales instead of save some cost ... I'd really ... like ... to think ...

Number 3 of the risks is the most concerning. I still like the numbers and the PE/stock price (current in the $15 region) is good for Dell. Going long.