Looking at the Market and Three Tech Stocks - Dell, Apple and IBM 13 comments
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Apparently, Americans don’t enjoy paying their neighbor’s mortgage.
Who saw that coming? Actually, although I believe this fact to be true (and I will address it in this article) I don’t think it mattered as much what was in the stimulus, as the sad fact remains that we simply don’t have the earnings, confidence, and unfortunately jobs, that we need to bring this market back immediately.
In the meantime, look for me spilling my brain’s reactions to current events as well as the indecisiveness and confusion that is replacing (or, more accurately, supplementing) the pessimism we have seen over the past year, followed by a few tech ideas that might spark your interest.
Paying off your mortgage? Check out OPM.
I never thought I’d say this, but I’m glad I woke up to CNBC Friday morning. Anyone who caught the pre-market show observed Rick Santelli going off on the world, and shortly thereafter, Mark Haines giving it to Donna Edwards when she dodged a great, great question.
To keep it brief, “Screaming Rick” Santelli went absolutely nuts Friday morning, and I loved it. He began loudly polling the traders on the floor regarding (among other things) whether they would like to pay for their neighbor’s mortgage or spend that money on young people who can “carry the water rather than drink the water”. Although dangerously imbalanced most of the time, I really, really enjoyed Rick’s rant because at the heart of it was the sentiment of the people – Why should we pay for others’ mistakes?
There are many answers. Granted, it may not be fair to pay for bad mortgages with “OPM” (other people’s money), but it’s one of the few resolutions that doesn’t involve a middle finger and years of waiting. However, there is a glaring problem with this concept – one that was powerfully and passionately made by Mark Haines, and made a Maryland Congresswoman regret waking up this morning.
Mark made the point I was preparing to make this week when he asked Edwards “who will get the profits if these home prices go up?” In other words, as the taxpayers begin bailing out those borrowers who cannot currently afford their mortgages, and over time their homes (which should not really even belong to them) increase in value, who will reap those rewards? The answer, of course, is currently those undeserving homeowners, but Edwards dodged the question like bullets in The Matrix.
It was uncomfortable for everyone involved, and it made great television.
However, at the root of the issue is a prominent truth – the taxpayers footing the bill for this endeavor are not simply helping those less fortunate… they are, additionally, providing those homeowners with a huge profit opportunity if their home increases in value over the next given number of years.
This does not sit well, and rightfully so. Though it does offer an immediate booster shot, its future implications need to be addressed.
A bull, a bull, my kingdom for a bull
“I don’t want to know what I should have done, I want to know what I should do now.”
~ Almost Every Investor Who Has Ever Lived
The Dow closed at a six-year low on Friday. That is not good. The only aspect that can be looked upon favorably is the fact that the S&P has about twenty-five or so more points to play with before it’s at new lows.
So, more than ever, investors are preparing for another meltdown but are no less exhausted and devoid of patience as they watch their portfolios turn into mush. I’m looking more towards individual stocks over broad market indices until I see what happens with these lows.
As an example of this, I want to mention a word about a few tech companies that we all know and love. Dell (DELL), Apple (AAPL), and our friend IBM.
Fundamental information, technical stocks
Let me get IBM out of the way first. I’m going to wait to buy this thing until I see whether we hold the lows. I would like where it is now (plus it pays a dividend…currently…) if I genuinely were convinced we’re headed up immediately from here. But I’m not. So I’m not.
Dell and Apple sell products that are similar but at the same time very different. Apple appeals more to the younger and/or art-and-media-centered groups as well as owning the huge iPod market. Dell is producing PCs and laptops we’re used to seeing (especially in corporate environments), and has mp3 players, but no longer ones that bear its own name.
I’ll be honest – I think Apple is a better company. However, I’m not looking to work at the company, I’m trying to make a few bucks off of their stock. Therefore, I am looking more towards Dell right now. The price is simply better.
No, I’m not talking about $8 versus $90 per share, I’m talking about the price relative to earnings and prospects going forward. P/E ratios don’t cut it for some people, and there’s a bunch of great reasons for that. However, when one is trading at 16.8 times earnings (Apple) and the other is trading at 5.9 (Dell), a little switch goes off in my brain. It says “if this company will be around in a few years, and sells a viable product (both are true), then buy it.”
Oh, there’s another little switch that notices when, since July of last year, the CEO has purchased over $200 million of the company’s stock. And hasn’t sold a share. He bought most of these shares in the neighborhood of $21 per.
I hope to be able to recognize some more buys as the next few weeks show their colors. Hopefully that color is not a new shade of red.
Disclosure: no positions
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1) Mikey made a stupid buy which he at least can well afford.
2) Dell is losing share hand over fist to AAPL (as well as others)
3) While this economy is a poor one for ANY purchases, AAPL's customers are still buying at reasonable rates while DELL & the other purveyors of the OS of the Evil Empire are getting clocked by the cheapo netbooks.
4) AAPL has $28-30 a share IN CASH.
5) AAPL has BILLIONS in iPhone & OS subscription income, more of which is accruing everyday, but is not recognized by anal ists (probably because they couldn't find their Glueteus Maximus with both e their hands).
Oh sure, NOW it is perfectly clear why the sucker, err investor should buy DELL & avoid AAPL like the plague.
Ayuh
In refrence to your comments re "Dell is losing share hand over fist to AAPL (as well as others)"..what a load of rubbish, heres why - 82% of Dells revenue come from business to business sales, 26% of Dell's revenue come from enterprise storage products such as Powervault MD products, EMC SAN's, Equalogic ISCSI SAN's.33% comes from Servers, 19% from Services and a mere 19% from Client products (PC's, Notebooks etc).
Tell me what market share apple holds on storage? Tell me what market share apple has on servers? Tell me what market share apple has on managed services? Tell me how many fortune 500 companys buy apple?
The facts speak for themselves. Apple is a comodity drive business selling to Joe public..they will never break into the worlds biggest corporate customers where the big data centres, infrastructures and service contract are. Apple will just continue to sell tin to consumers!!
Fact:"No other customer beyond Dell and HP accounted for double-digit percentage of Intel's revenue last year. Both Dell and HP combined accounted for nearly 40% of Intel's revenue, or $13.91 billion in revenue, clearly reflecting standing and unit shipments of the two vendors on a global basis"
Fact: PC's and Laptops alone dont make you money and wont allow you surpass the big boys
Quick facts from Dell's own website
Every Fortune 100 company does business with Dell.
We’re the #1 PC provider in the U.S. and #2 worldwide.
We’re the preferred desktop and laptop of enterprises in the US and Europe.
We’ve been the No. 1 PC supplier to small and medium businesses in the United States for 10 years in a row.
And we’re the world’s leading provider of flat panel displays.
About 140,000 systems shipped per day, on average – that’s more than one every second.
We have nearly 2 billion interactions with our customers every year.
We won more than 400 product awards in 2007.
More than 55,000 customers have posted ratings and reviews on Dell.com.
Customers have also offered more than 9,100 ideas on IdeaStorm that have been promoted more than 617,000 times.
And, our customer have generated and confirmed more than 7,000 accepted solutions to their technology challenges.
We’re the #1 partner of EMC.
Our blade servers that require 65 percent less time to set up and come in 97 percent fewer boxes than HP’s.
We rank No. 34 among the Fortune 500, and we have one of the world’s leading brands.
Ours are among the industry's greenest desktops and notebooks.
We were the first vendor to offer DisplayPort technology on a commercially available monitor, and were a major driver in having it accepted as the industry standard.
We were also the first major systems vendor to factory install Red Hat Linux on corporate systems.
24 of the world’s top supercomputers run on Dell.
The 10 largest U.S. companies run on Dell.
The top 6 Internet service companies run on Dell.
The top 5 U.S. commercial banks run on Dell.
We shipped the first EPEAT Gold standard notebook.
Our global headquarters campus is powered by 100 percent green energy.
Our desktop systems that have helped customers save more than $2.4 billion and avoid more than 23 million tons of CO2.
We’re the first and only computer company offering free computer recycling to consumers worldwide.
On Feb 24 03:42 PM another.anal.ist wrote:
> Let's see:
> 1) Mikey made a stupid buy which he at least can well afford.
> 2) Dell is losing share hand over fist to AAPL (as well as others)
>
> 3) While this economy is a poor one for ANY purchases, AAPL's customers
> are still buying at reasonable rates while DELL & the other purveyors
> of the OS of the Evil Empire are getting clocked by the cheapo netbooks.
>
> 4) AAPL has $28-30 a share IN CASH.
> 5) AAPL has BILLIONS in iPhone & OS subscription income, more
> of which is accruing everyday, but is not recognized by anal ists
> (probably because they couldn't find their Glueteus Maximus with
> both e their hands).
>
> Oh sure, NOW it is perfectly clear why the sucker, err investor should
> buy DELL & avoid AAPL like the plague.
>
> Ayuh
In refrence to your comments re "Dell is losing share hand over fist to AAPL (as well as others)"..what a load of rubbish, heres why - 82% of Dells revenue come from business to business sales. Broken down by product - 26% of Dell's revenue come from enterprise storage products such as Powervault MD products, EMC SAN's, Equalogic ISCSI SAN's.33% comes from Servers, 19% from Services and a mere 16% from Client products (PC's, Notebooks etc).
Tell me what market share apple holds on storage? Tell me what market share apple has on servers? Tell me what market share apple has on managed services? Tell me how many fortune 500 companys buy apple?
The average companys data has grown 600% in the last 3 years due to the advent of data legislation, HD files, increased email trafic etc etc. Its estimated to grow a further 1200% in the next 5 years. Tell me what apple are doing in the storage market where a single enterprise SAN solution can cost anywhere from $20k-$500k and as the data growns so more storage is needed. Oh thats right they offer a $50 Ipod with a 16gb HDD ;-)
The facts speak for themselves. Apple is a comodity drive business selling in bulk to Joe public..they will never break into the worlds biggest corporate customers where the large big data centres are, where the large IT infrastructures and service contract are. Apple will just continue to sell tin to consumers!!
Fact:"No other customer beyond Dell and HP accounted for double-digit percentage of Intel's revenue last year. Both Dell and HP combined accounted for nearly 40% of Intel's revenue, or $13.91 billion in revenue, clearly reflecting standing and unit shipments of the two vendors on a global basis"
Fact: PC's and Laptops alone dont make you money and wont allow you surpass the big boys
Quick facts from Dell's own website
Every Fortune 100 company does business with Dell.
We’re the #1 PC provider in the U.S. and #2 worldwide.
We’re the preferred desktop and laptop of enterprises in the US and Europe.
We’ve been the No. 1 PC supplier to small and medium businesses in the United States for 10 years in a row.
And we’re the world’s leading provider of flat panel displays.
About 140,000 systems shipped per day, on average – that’s more than one every second.
We have nearly 2 billion interactions with our customers every year.
We won more than 400 product awards in 2007.
More than 55,000 customers have posted ratings and reviews on Dell.com.
Customers have also offered more than 9,100 ideas on IdeaStorm that have been promoted more than 617,000 times.
And, our customer have generated and confirmed more than 7,000 accepted solutions to their technology challenges.
We’re the #1 partner of EMC.
Our blade servers that require 65 percent less time to set up and come in 97 percent fewer boxes than HP’s.
We rank No. 34 among the Fortune 500, and we have one of the world’s leading brands.
Ours are among the industry's greenest desktops and notebooks.
We were the first vendor to offer DisplayPort technology on a commercially available monitor, and were a major driver in having it accepted as the industry standard.
We were also the first major systems vendor to factory install Red Hat Linux on corporate systems.
24 of the world’s top supercomputers run on Dell.
The 10 largest U.S. companies run on Dell.
The top 6 Internet service companies run on Dell.
The top 5 U.S. commercial banks run on Dell.
We shipped the first EPEAT Gold standard notebook.
Our global headquarters campus is powered by 100 percent green energy.
Our desktop systems that have helped customers save more than $2.4 billion and avoid more than 23 million tons of CO2.
We’re the first and only computer company offering free computer recycling to consumers worldwide.
Heres why Apple will never get anywhere near the Dell's/HP's of this world
In refrence to your comments re "Dell is losing share hand over fist to AAPL (as well as others)"..what a load of rubbish, heres why - 82% of Dells revenue come from business to business sales. Broken down by product - 26% of Dell's revenue come from enterprise storage products such as Powervault MD products, EMC SAN's, Equalogic ISCSI SAN's.33% comes from Servers, 19% from Services and a mere 16% from Client products (PC's, Notebooks etc).
Tell me what market share apple holds on storage? Tell me what market share apple has on servers? Tell me what market share apple has on managed services? Tell me how many fortune 500 companys buy apple?
The average companys data has grown 600% in the last 3 years due to the advent of data legislation, HD files, increased email trafic etc etc. Its estimated to grow a further 1200% in the next 5 years. Tell me what apple are doing in the storage market where a single enterprise SAN solution can cost anywhere from $20k-$500k and as the data growns so more storage is needed. Oh thats right they offer a $50 Ipod with a 16gb HDD ;-)
The facts speak for themselves. Apple is a comodity drive business selling in bulk to Joe public..they will never break into the worlds biggest corporate customers where the large big data centres are, where the large IT infrastructures and service contract are. Apple will just continue to sell tin to consumers!!
Fact:"No other customer beyond Dell and HP accounted for double-digit percentage of Intel's revenue last year. Both Dell and HP combined accounted for nearly 40% of Intel's revenue, or $13.91 billion in revenue, clearly reflecting standing and unit shipments of the two vendors on a global basis"
Fact: PC's and Laptops alone dont make you money and wont allow you surpass the big boys
Quick facts from Dell's own website
Every Fortune 100 company does business with Dell.
We’re the #1 PC provider in the U.S. and #2 worldwide.
We’re the preferred desktop and laptop of enterprises in the US and Europe.
We’ve been the No. 1 PC supplier to small and medium businesses in the United States for 10 years in a row.
And we’re the world’s leading provider of flat panel displays.
About 140,000 systems shipped per day, on average – that’s more than one every second.
We have nearly 2 billion interactions with our customers every year.
We won more than 400 product awards in 2007.
More than 55,000 customers have posted ratings and reviews on Dell.com.
Customers have also offered more than 9,100 ideas on IdeaStorm that have been promoted more than 617,000 times.
And, our customer have generated and confirmed more than 7,000 accepted solutions to their technology challenges.
We’re the #1 partner of EMC.
Our blade servers that require 65 percent less time to set up and come in 97 percent fewer boxes than HP’s.
We rank No. 34 among the Fortune 500, and we have one of the world’s leading brands.
Ours are among the industry's greenest desktops and notebooks.
We were the first vendor to offer DisplayPort technology on a commercially available monitor, and were a major driver in having it accepted as the industry standard.
We were also the first major systems vendor to factory install Red Hat Linux on corporate systems.
24 of the world’s top supercomputers run on Dell.
The 10 largest U.S. companies run on Dell.
The top 6 Internet service companies run on Dell.
The top 5 U.S. commercial banks run on Dell.
We shipped the first EPEAT Gold standard notebook.
Our global headquarters campus is powered by 100 percent green energy.
Our desktop systems that have helped customers save more than $2.4 billion and avoid more than 23 million tons of CO2.
We’re the first and only computer company offering free computer recycling to consumers worldwide.
On Feb 24 03:42 PM another.anal.ist wrote:
> Let's see:
> 1) Mikey made a stupid buy which he at least can well afford.
> 2) Dell is losing share hand over fist to AAPL (as well as others)
>
> 3) While this economy is a poor one for ANY purchases, AAPL's customers
> are still buying at reasonable rates while DELL & the other purveyors
> of the OS of the Evil Empire are getting clocked by the cheapo netbooks.
>
> 4) AAPL has $28-30 a share IN CASH.
> 5) AAPL has BILLIONS in iPhone & OS subscription income, more
> of which is accruing everyday, but is not recognized by anal ists
> (probably because they couldn't find their Glueteus Maximus with
> both e their hands).
>
> Oh sure, NOW it is perfectly clear why the sucker, err investor should
> buy DELL & avoid AAPL like the plague.
>
> Ayuh
Did you consider Dell's other revenue streams where apple either doent play or has little to no market share? Servers, Storage, Consuling services, Software and Peripherals. Did you know that Dell are the 3rd largets IT reseller in the Globe - Largets Microsft reseller on the planet, 2nd largest customer of Intel behind HP, not to mention you can buy any other manufacturers kit from Dell if you are business customer. You mention that Iphone will see further revenues from subscriptions. Think about the data storage market which Dell holds num 1 position in both interms of market share and revenue. The data storage market has grown 600% in the last 5 years and is expected to grow 1200% in the next 5 years
On Feb 24 03:48 PM waf76 wrote:
> How are you looking at Apple using P/E ratio when their iphone revenue
> is based on the subscription method of accounting which recognizes
> a sale of 1 iphone over 8 quarters? Your comparison is highly inaccurate.
> I hope its not the sole method in concluded thats the reason you
> like Dell. At this point HP looks like a better option.
What flavor of Kool Aid are you drinking today?
I'll have another glass of Dell delicious please, oh and make that green with a dash of envy.
I have to say, however, that I do see a danger for Dell (data from yahoo):
Profit Margin (ttm):
14.70% --- AAPL
4.41% --- DELL
Qtrly Revenue Growth (yoy):
5.80% AAPL
-3.10% DELL (yes, that is negative)
These figures do not bode well for Dell. As the economy contracts, it can only force margins tighter. Apple has plenty of room here, Dell does not. I would be hesitant to pick up shares in this economy.
Also - we do need to repeat what others have said. Apple's PE does not reflect reality - You need to do the PE on the Non-GAAP numbers to get a real PE. Not sure the figure - but it is lots lower than the author's.
Good luck to all of us!
On Feb 24 06:14 PM cloughg wrote:
>
> In refrence to your comments re "Dell is losing share hand over fist
> to AAPL (as well as others)"..what a load of rubbish, heres why -
> 82% of Dells revenue come from business to business sales. Broken
> down by product - 26% ...
You do make a good point about what happens when the homeowners we bail out make a profit later on, based on OPM. Who wants to do that? Not me either.
But the answer is not so simple The question is:
- Do we want this person, and millions like him/her to have their homes foreclosed adding to the bank losses and further prolonging the recession? How much longer do you want to wait for your DELL or Apple or IBM shares to go up? How many more jobs do you want to see lost? Do you want to see YOUR OWN house continue to loose value?
So, sometimes it is necessary to do what we would rather not do in order to achieve a greater goal. Unfortunately, we appear to be between a rock and a hard place.
PC Market Not Looking Good, Dell Especially
seekingalpha.com/artic...
You've been doing that for many, many years. What, you say? Yes. It's called "deducting mortgage interest." That's a taxpayer subsidy to homeowners. As far as I know, no other type of consumer debt has deductible interest. (Quite a while ago, one could deduct interest on car loans, etc.) This is why people get second mortgages and lines of credit to buy cars, send kids to college, etc., and one reason some people are now under water.
Of course, this subsidy is worth more to high-income taxpayers because of their higher marginal rates.