I'm going to do some simple calculation and discussion to explain why Dell is an excellent company at a bargain price.......

Step 1: FCF/EV yield vs. Treasury yield

Enterprise Value (EV) = $49.1B

Free Cash Flow (FCF) = $4.1B

FCF/EV yield = 8.35%

Treasury yield (30 years) = 5.30%

Dell looks like an excellent deal compared with treasury yield.

Step 2: Insider holdings

I have mentioned about superior return by investing in founder-CEO companies. Investing in companies that have significant insiders holding is one of the great ways to achieve superior return.

Michael Dell has holdings over 10% of the Dell. On top of that, he is still young and has great enthusiasm to expand Dell’s empire.

To read my previous comment on insiders holding, please visit: http://dahhuilaudavid.blogspot.com/2006/04/superior-stock-return-by-having.html

Step 3: Is Dell a good Company?

Profit Margin (ttm): 6.39%
Operating Margin (ttm): 7.96%

Return on Assets (ttm): 12.01%
Return on Equity (ttm): 67.31%

Dell has good Return on Assets.

Step 4: Does Dell management shareholders-orientated?

Dell has been buying its own shares aggressively; purchasing up to $6.2B, which is more than its income of $3.57B. Over the last 3 years, Dell has repurchased over $10B worth of shares, and with its current low price, I don’t see why Dell will stop repurchasing its shares even more furiously. Buying back shares is an important step to enrich shareholders, as long as it doesn’t restrict its financial ability to expand and improve its service.

Step 5: Do you understand its Business?

Dell was founded in 1984 by Michael Dell, the longest-tenured executive to lead a company in the computer industry. The company is based on a simple concept: by selling computer systems directly to customers, Dell could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. This direct business model eliminates retailers that add unnecessary time and cost, or can diminish Dell's understanding of customer expectations. The direct model allows the company to build every system to order and offer customers powerful, richly-configured systems at competitive prices. Dell also introduces the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory every four days on average. [From: Dell's website]

Step 6: Does Dell have a Moat?

Moat comes in different forms. As for Dell, its moat is being the lowest-cost producer of commodity, which is computer. Dell has done extremely well with its supply chain and direct model that it is hard to fathom an emergence of possible competitors.

Do you know how strong is its working capital management? Very, very strong. Dell has negative working capital! That’s right, it has a minus $4.6B of working capital. There aren’t many companies that have a negative working capital.

Step 7: Does any superinvestor invest in Dell?

Without doubt, there are famous superinvestors investing in Dell. Among them are Mason Hawkins (7.18% of assets), Bill Miller (0.87% of assets), and others. Mason Hawkins believes so strongly Dell is undervalued that he makes Dell its biggest holding.

Step 8: What are the potential risks in buying Dell?

“Our biggest worry is the competitive climate in the desktop PC market. Asian firms have often endured break-even margins to generate growth and could induce an irrational pricing environment in their quest for market share.” [From Morningstar report]

Conclusion:

Dell is a buy at current price of $25.20.

Warren Buffett said, “The most common cause of low prices is pessimism -- some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.”


Happy investing,
Dah Hui Lau (David)
dahhuilaudavid@gmail.com

To visit my archive: http://dahhuilaudavid.blogspot.com/2005/11/archive-of-dah-hui-laus-blog.html

Over many hours and many more liters of coffee, my friends and I deliberated on why we always seem to go for the mean men? Why it is, that we find ourselves attracted to the boys that bark and the men who hardly know we exist?

On a particularly unproductive day at work, I wondered over to one of my collogue/friend’s desk and decided to distract her. She is a sexy, smart fashionista who I conveniently discovered, shares my taste in men. As I sat at her desk, we giggled and blushed as we forced each other to reveal our secret work crushes. After scrolling through the list of arrogant and sexy traders, the confident and edible sales boys and who could forget the nerdy techies with their mysterious glasses (yes the glasses are an abnormal attraction I know, but we settled on the fact that they create an air of mystery, or something of that nature), I came to the conclusion that we ladies are attracted to the bad boys.

In high school, it was the bad boy with his uniform altered to an inch of its life, he smoked (I hate smokers now) and he jigged school, but there was something about him that made my heart skip a beat. At uni, it was the guy who drove the fastest car, rode the speediest motorbike and never paid for a thing, he too, made my heart race. And now, it’s the sexy suites, the arrogant, cocky boy’s boy that makes me bite my bottom lip. Why are we attracted to the meanies?

I have a friend who is a sexy, wonderfully sensitive and passive aggressive guy. He dresses only in Saba or Caliber and when I am around him, I am completely at ease. Yet given the stats, I do not find myself attracted to him. Are we incessantly trying to personify the saying “treat them mean, keep them keen”? Why not the nice guys? Are we saving the nice ones for marriage? I certainly hope so, because this is starting to become a very bad indulgence.

L a_ p o d e r o s a _o b r a _c o n t i n u a ...

Before you click, At the end of the url of this link is 666. You can change that to any price you want. (0.00 format) Make a freind think he's getting a great deal!read more | digg story

New fire equipment blogs see on-fire extinguisher fire extinguisher safety

The history of jewelry is as old as human existence .in ancient time bones and teeth were used in jewelry making .But Egyptian people are known as the pioneers of designer jewelry, they added colors to the jewelry with precious gemstones. Jewelry made from silver and gold was also one of the famous inventions in designer jewelry in Egyptian era. platinum jewelry stores