When HPQ was in its hey days, I didn't buy because it was too expensive. We then witnessed it steadily falling from about $50 to $20, then $18. And at this level, thinking it a bargain, some probably could have started buying into it. If it was on margin, it would have been a total loss. Margin buying is extremely risky. Diversification also is a must in any portfolio. My self restraint from trading HPQ and value-based research allowed me to steer clear of the stock. Never did I own a single share of HPQ. Of course not when it was arouond $12 pending the acquisition of Compaq a decade ago. Now the stock is at under $12 again, bottom fishers may be watching. My view is it is still a wait and see situation, as it will need quite a few years to turn itself around both top and bottom lines wise. Its huge debts burden is a big negative, and a lot of its debts will come due in the next two years.
As shown in my previous posts yesterday, it will take only 2-3 years to get all your investment money back if one buy up the whole company at this current price of about $9, and still sit at your corner CEO office and own 100% of the business, which at current rate, will continue to generate $3-5 billion cash flow from operation annually. Isn't is a cash cow? As tremendous amount of money will be made on this stock anyway, there is no reason that little guys like me can't take advantage of it. So let's make some money for our families in these next 24 months. Big boys know. They are now quitely accumulating it. I observed that retail is selling due to margin calls pressure, and those rich greedy big boys are happily taking their shares. The current price is at depressed, compressed and suppressed level. It would therefore be fantastic if one is able to make use of this extremely exceptional Dell buying opportunity.
I am on very light margin, and full diversification as it has always been. I won't tell you to sell your house to buy a stock. Investment is an art in life. It should be a balanced approach based on your own criteria. Though I see Dell as having the most compelling risk/reward ratio in the universe where we live, my portfolio still stretches boardly across different industry segments. I buy pharmaceutical, as well as biotech too.
Like someone said in an interview at CNBC days ago, it is crazy not to be on equity. Dividends, PE Ratio, Cash Assets, Cash flows, all these point to a significantly higher market ahead. Stock prices have to appropriately truly reflect all these magnificient elements. The stock market is still fundammentally considerably undervalued as a whole. And there are some stocks, like Dell, that will even outperform this up and coming rising market.
Happy Thanksgiving And Smart And Confident Investing!