Is Dell Stock a Good Buy.... or Not? (June 2012)

What do you think, is DELL stock a good buy at current price levels (June, 2012), just over $12.00/share? Or, is the stock not worth taking the risk right now because you think the stock has much lower to go with no recovery in sight?

Writing today's article on DELL's stock came to mind after I was browsing stock charts and saw where DELL closed this past Friday, at $12.30/share.

I distinctly remember seeing DELL trading near $12.00/share, several times over the last few years, and each time, wound up being a great buying opportunity as the stock rose considerably after each dip. (I also remember seeing DELL trade in the $8.xx's, during the 2009 market low's and thinking what a buy it was at the time)

Arguments for and against opening a position in DELL

  • Pro: We all know who DELL, the company is, and if not, DELL is a multi-billion dollar, multi-national corporation, which was founded by Michael Dell in 1984, in Austin, Texas (under a different name until 1988). The company has a good track record behind it, especially in making adjustments to keep up with changes in the PC/Technology arena. (...for the most part, in my opinion)
  • Pro: Michael Dell is now, and has been for many years, a billionaire, due to his business success and skills. DELL has been through good times and bad.
  • Pro: Every time I have seen DELL's stock price move down near $10.00-$12.00/share in the past, the company has taken action, implemented new strategies, and the stock has rebounded. Not a sign that management stands around and waits for better times to come to them.
  • Pro and/or Con: DELL just announced they will start paying a quarterly dividend of $.08/share to shareholders. This has been seen and written about, as a positive AND a negative... (This comes as no surprise to me as the media always seems to put negativity out in front above everything else). A dividend can definitely be seen as both a pro and a con, but there is the opportunity to use it to a shareholders advantage if action is taken.
  • Pro: The company has recently announced they plan on cutting over 2 billion dollars in expenses over the next 3 years.
  • Pro: DELL has almost $8.00/share in cash on hand and more cash than debt.
  • Con: DELL has a declining quarterly earnings growth.
  • Con: DELL has been losing market share due to the boom in the current hot trend in Tablet's/iPad's, thus the declining earnings growth above.

I/we can go on and on with arguments for and against taking on a position in DELL at current price levels, and, depending on each of our risk tolerances, now may or may not be the time to take action. Ultimately, the decision is each of ours, of course.

You can see on the chart below how DELL has declined to below $12.00/share several times over the last few years and each time, has risen considerably afterwards.

DELL Stock a Good Buy

Based on how I've seen DELL's stock perform in the past, my experience as a DELL customer, DELL's cash management abilities shown over the years, the price action on the chart above, and, opportunities to buy DELL at a discount using options (learn more about using options to your advantage in a case like this here: Leveraged Investing Guide) all while receiving a dividend for being a shareholder, I feel DELL is worthy of serious consideration for anyone looking to open a position in a tech company, adding to their portfolio.

Keep in mind that just as with any investment in a stock, DELL could do fine moving forward, or, DELL could trade down below $10.00/share, even into the $5.xx's/share (or lower) is a possibility (anything's possible). Use proper position sizing and management at all times.

Note: This article is a discussion and personal opinion on DELL stock only, and not a recommendation to buy, sell or otherwise open any position in DELL. I currently do not have a position in DELL, as of writing this article, but may initiate a position in the near future;-)





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