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A Tale Of Two Stocks: Dell Vs. Intel

|Includes:Dell Inc. (DELL), INTC

On November 2, 2012, our valued subscriber S.D. asked us about our thoughts on Dell being the second stock on our Nasdaq 100 Watch List. We said the following (found here):

"From what I can see, Dell is within 13% of the 2009 low. This suggests that the stock is under considerable strain even though we're not in "crisis mode" as was the case when Dell bottomed in 2009. I expect that Dell will retest that low ($8), at minimum. The $4.15 level is the next technical support.

"However, if you're interested in purchasing Dell, I would consider making the purchase in three stages with $8 and below as the starting point, with the understanding that it is a pure speculation. Dell appears much more speculative than I'd like and believe that there are reasonable alternatives that could take its place.

"Contrast this with our most recent purchase of Intel (NASDAQ:INTC). Essentially, we have taken the view that the PC is not dead and that there are values to be found. From a technical standpoint, INTC has maintained a solid uptrend from the 2009 low and has a better fundamentals, including dividend yield.

"Whether HPQ or DELL come out ahead is of less concern since we believe the INTC will be the primary supplier of chips when the cycle turns."

Since November 2, 2012, DELL and INTC have had the following performance (based on the closing price of January 17, 2013).

As should be clearly seen in the chart above, DELL has risen +40.11% while INTC has actually lost value (-4%)based on trading lower on January 18, 2012. It is clear that subscriber S.D. was onto something when it was suggested that DELL was worth consideration. Little did we know that gains of +20% were in store for DELL in two months and +40% in 2 ½ months.

In a follow-up piece on DELL from November 16, 2012, when DELL was trading at $8.86 we said the following (found here):

"We believe that on a short-term basis DELL will rise on a possible market reaction. However, the intermediate-term seems to indicate that DELL will go to $8 before any 'true' indication of prospects is revealed, unless the company gets acquired which seems possible. Dell would be one of the best acquisition target of any computer manufacturer since Lenovo bought the personal computer division from IBM."

The price action between DELL and INTC since November 16, 2012 is charted below (based on the closing price of January 17, 2013):

DELL increased +44.70% while INTC gained slightly more that +5%. The gains at Dell are staggering and we applaud S.D. for bringing up the question so that we could see the potential of a stock that we'd otherwise overlook, even though it was prominently among the top five stocks on our November 2, 2012 watch list. As we've said many times in the past, stocks that appear on our watch lists have often been buyout candidates and therefore worthy of a second look.

Again, thank you S.D. for your contribution to our site. We hope you benefited from your own intuition on DELL.

Disclosure: I am long INTC.

Stocks: DELL, INTC