Arne Alsin
This column was originally published on RealMoney on Feb. 2 at 11:05 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.
If you're trying to improve your investing skill set, you might want to take a second look at some underloved sectors. They can teach you a lot about finding bargains in an always-changing market environment. Over the next few months, I'll be integrating core investing concepts into a methodical review of stocks in every major market sector. Yesterday, I examined some chemical companies. In this column, I'll cover investing concepts and ideas culled from the computer and office supplies sectors. As the computer industry matures, it becomes a more compelling sector for long-term investors. That's because excess capital no longer flows into it. Excess capital flows create excess capacity, which, in turn, begets lower profitability. This growth sector has no new entrants, and consolidation has reduced the number of major suppliers. For example, Compaq was acquired by Hewlett-Packard (HPQ Quote - Cramer on HPQ - Stock Picks), eMachines was acquired by Gateway (GTW Quote - Cramer on GTW - Stock Picks) and Lenovo bought IBM's (IBM Quote - Cramer on IBM - Stock Picks) PC operation. This sort of consolidation augurs well for the sector's long-term profitability.Dell: The Long View
PC maker Dell (DELL Quote - Cramer on DELL - Stock Picks) has been making headlines lately, with CEO Kevin Rollins resigning and founder Michael Dell retaking the reins. However, look past the short-term noise surrounding this stock and take a longer view. Dell is a compelling buy in the $20-to-$22 area, compared with its current level of $23.80. From there, it represents a low-risk double over the next four years. (That's an investment return of 18% per year.) This assumes that Dell grows revenue beginning this year at 10% per year and maintains current operating margins. Looking past the short term, you can reasonably argue that Dell deserves a premium valuation. That's because the company's return on equity -- at more than 50% and unleveraged -- is exceedingly rare.|
DELL (DELL) |
 |
RSS
