Editor's Note: Jim Seymour's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published Nov. 27 on RealMoney.
I've gotta get some security guys in here to do a sweep on my office.
Monday morning I was sitting here working on a column about safe ways to participate in this maybe-rally, focusing on the share-takers -- those companies that are so strong and nimble that even in these difficult days, they're moving ahead, stealing market share from their competitors.
Because whatever happens short-term in the market, these powerhouses are likely to do at least OK. And when things really do turn around, they're going to stomp around like the market-dominating players they've become.
was my cleanest example.
So I look at the site, and
(excuse me, Emeril...), Jim Cramer has
a column up on the wisdom of ... uhh ... buying the hot share-takers, such as ... uhh ... Dell. And
Maybe he's got a bug hidden in that big ficus tree over by my window.
It's a great strategy, and a classic example of a smart way to work the market in troubled times. Dell, for example, is mopping up market share from its three most important competitors,
Yes, all three have other problems. Compaq is suffering from the stasis inherent in a big, maybe-it'll-go, maybe-it-won't merger with H-P, and no matter how that cookie crumbles, Compaq is going to have a devil of a time re-establishing itself with its corporate customers and with the retailers who are its link to consumers.
Hewlett-Packard is suffering from that same sticky mess, and from apparent confusion about just what business it wants to be in. And Gateway, though the stock has doubled from an all-time low of $4.24 two months ago, is still wrestling with a return-of-the-founder re-org, and with a tough consumer market.
But the biggest problem all three face is Dell, which is pushing new models out the door, (still) cutting prices and edging into new markets. And stealing market share.
That's what's driven Dell's price from an ugly $16 after the Sept. 11 attacks to nearly $27 yesterday. That, plus a selectively rising tech-stock market in the form of this maybe-rally.
Which is exactly the problem with a full-bore buying focus on share-takers right now. Dell has run up more than 60%. All around it, there are other big recent gainers:
, up 64%,
, up 75%,
, up 34%,
, up 31% -- all just since the events of Sept. 11.
Because of improving sales? No. Because of obvious improving market conditions? You're kidding.
Why? Because investors want to
. Tech investors, especially, want to get in early on a promised, hoped-for, gotta-happen-soon recovery. And so they've been piling into a handful of tech stocks, such as Dell. And tomorrow?
I think this mini-rally, as much as I hope it's real, and continues, could go away in the blink of an eye. All the economic indicators point toward negative growth in the economy in the first quarter of 2002. Capital investment in tech tools is down and likely to stay down another couple of quarters. Consumer spending is still a big question mark. There are still layoffs to come. Etc.
So sure, I love the idea of buying share-takers. I'll be buying some. But I'm not backing up the truck. Not yet, anyway. And I'm using stop-loss orders about 15% down from my buying prices, in case things go
Believe in this rally. But protect yourself.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, Seymour was long Cisco, although positions can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites you to send your feedback to