Dude, Buy Dell

10/01/2002 12:00 am EST


Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Each week, Louis Navellier and his Reno, Nevada-based team of more than 50 professional analysts and support staff analyze some 9,000 actively traded stocks, paring the list down to the top 1%. His MPT Review covers small- and mid-cap issues, while his Blue Chip Growth Letter focuses on a more limited universe of 600-800 stocks with market caps in excess of $5 billion. Since its start in 1997, the Blue Chip buy list has beaten the S&P 500 by six-to-one. Here’s the latest Blue Chip buy.

"For several months now, I’ve been warning of false rallies and a stock market recovery much narrower than Wall Street would have you believe. And now I'm warning you again. This is not the time to pick through the trash heap of battered stocks looking for bargains. The current environment is extremely similar to the 1973-1974 market. Approximately 20% of the stocks led the market higher back then, while it took eight years for the broad stock market to erase all the damage that had been done.

Nevertheless, there are pockets of opportunity in companies with real and significant earnings growth. I'm reinstating my ‘buy’ rating on Dell Computer (DELL NASDAQ) since the volatility has subsided dramatically during the past few months. I was happy to see the company report strong earnings last quarter ($0.19 a share, in line with estimates). Wall Street has slowly raised its estimates for next year, and the year after.

Despite the chaos surrounding many technology stocks, it appears that Dell has gotten stronger. For example, Dell Computer is picking up a lot of corporate clients due to the uncertainty surrounding the Hewlett-Packard and Compaq merger. Specifically, Dell has picked up over 1,000 new corporate clients in recent months for its network servers and other high-margin products.

Sun Microsystems' ongoing problems are also sending some corporate clients to Dell. While the morale at many of its competitors remains low due to continued worries about corporate layoffs, Dell isn't planning any immediate layoffs. The higher morale of its employees is also helping it attract more corporate business (especially for higher service products such as file servers). In fact, Dell is improving so quickly that it's now one of my Top Five Stocks on the Buy List."

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