Dell, Inc. (DELL)

blade5adj (< 20) Submitted: 6/5/2008 10:41:24 PM : Start Price: $18.60 DELL Score: +0.70

My initial pick for this stock was that they were being undervalued and that their quarterly report would show an increase in profit over analysts predictions. This ended up being the case, but the question becomes whether or not this is a stock to get into now if you "missed the boat" so to say.

I'm going to say yes, more because of the product that dell is putting out than the statistics surrounding the company. With this, I'm guessing that they will gain market share rather than increase profit margins, which would be one of the typical ways that a company would improve their earnings. These home computer companies, such as HP, will always have fairly low margins, because they are all limited by the operating system they run on (all have Windows), and the level of hardware capability available. Thus, if you were in the market for a PC, although part of your decision is what company you feel is producing the better designed and effective product, the largest determinant is price. In this department, I feel as though Dell will continue to beat out other computers by providing a method of getting the computer that does not involve going through a third party, such as the Circuit Citys and Best Buys of the world.

They've also made an extremely large commitment to increasing efficiency and decreasing power consumption, which as it was featured in a recent Economist article, will become exceptionally important for consumers, especially those using servers. When you think about it, if you can purchase a product that will cut your energy consumption in half, you're drastically reducing your overhead. In such a capital intensive industry as servers, this is a huge chunk that you'd be adding back to your P/L statement.

I've currently got an out-perform on HP as well as Dell, and it's my opinion that in this industry, those are the two shining stars. I would advise investors to look to some other industries that have higher margins though (a Buffet approach to finding companies with "large moats"), and this is something the PC market does not provide (look at Macs though). Take a look at Cisco or mining companies like Rio Tinto (RTP) and Freeport McMoran (FCX) to get that moat. I also feel like there are some exceptional deals in Closed End Equity and Debt funds.