Monday, August 28, 2006

Real Estate Classifieds

Yesterday I spent some time reading the Real Estate section of the Chicago Tribune. I did this a lot when I was younger, in high school and college, as an educational process. I used to pay a lot of attention to the small picture ads and even the classified listings to try to get a feel for values in various sectors of the metro area. Does anybody do that anymore? Read the listings, I mean. It hit me yesterday that the section looks pretty much the same as it did twenty years ago, even though the Trib has a pretty stout internet presence. Haven't sites like, not to mention the Tribune's own real estate search capability, rendered the printed listings obsolete?

Just seemed kinda odd to me.

Friday, August 25, 2006

Time to buy Dell?

Headline yesterday on "Why Dell's no longer a star stock". This is the point when I usually start getting interested in a stock. In truth, Dell has been on my radar all along because I work in technology, I'm a customer, they're high profile, etc. Let's ignore that for a second, though. We'll also ignore Dell's fundamentals for the sake of this argument, although I may come back to them in a different post.

Look at a chart for Dell over any period going back about three years, and it looks pretty bad. Environmental factors don't look so hot for them. HP has regained strength and has become a much more formidable competitor. Margins for Dell's core business are in perpetual compression mode. The SEC has taken an "informal" interest, apparently in some aspect of the company's approach to revenue recognition, or whatever. Now the batteries they buy from Sony are spontaneously combusting, and some airlines (Qantas, anyway) are apparently treating them differently than laptops from other companies, i.e. as security risks. Clearly, these are not the characteristics of a company that would attract customers looking to make a quick buck. Unless, perhaps, that investor is thinking of shorting the stock.

The question that I think is pertinent here is: has Dell, the icon of operational efficiency until a couple of quarters ago, really lost its ability to compete? Should it be 40% lower than it was a year ago? Or has it hit some rough spots that a rational investor can reasonably expect to be addressed by a management team that has demonstrated competence for years.

At the end of the day, financial characteristics - particularly earnings growth - should drive, or at least inform, any investment decision. However, seeing a well-managed company getting bludgeoned in the press, especially over short-term issues like combustible batteries, should be a trigger for further investigation.

My gut tells me that Dell will continue to drop in the near future, particularly if the SEC investigation becomes more serious and/or HP continues to take market share. However, I suspect some patient and prescient investors will buy low and profit nicely by riding out these storms.