Ken Deen's THE AGGRESSIVE TRADER(tm) "Seeking double-digit profits in one to four months" BUY ALERT 1339 Virginia Rd. Vol. 1, No. 86 Montecito, CA 93108 September 18, 1992 (805) 565-2039 11:40am EDT CompuServe: 72020,2050 Stock+Options Account: No trades Stock-Only Account: No trades DESI Trading System(tm): No trades Other Trading Ideas (these recommendations will not be tracked): Recommended for purchase: Dell Computer Corp. (DELL, $28.25) The DESI-3(tm) timing indicator has been RED lately: 9/15/92 GREEN 9/17/92 RED 9/16/92 RED 9/18/92 RED Recommended for purchase: Dell Computer Corp. Dell stock was hit hard in early June, as can be seen from the chart. This happened when Compaq announced its new low-cost line of PC's, putting it in direct competition with Dell. IBM is also expected to introduce a new low-cost line of PC's very soon. However, price wars are nothing new in the PC industry, and Dell has a remarkable way of surviving them. The market is acknowledging this, and the stock has fully recovered. Yesterday, the stock closed at 28 1/4, a new all- time high, the first all-time high since May. This represents a technical breakout. The stock had previously reached, then retreated from, the 27-28 level three times -- in March, April, and May of this year. The stock may or may not pull back this time as well, but I expect any such pullback to be relatively brief -- less than six weeks. The company's earnings and sales growth are so incredibly strong, and its P/E multiple so low, that it would be undervalued even if its growth does slow down. To illustrate the point, let's look at sales and earnings growth for the last four quarters. Percentages reflect comparisons with the respective year-ago quarters: Quarter Ended Sales($Mil) Earnings ----- ----------- -------- Oct 31 229.3 +68% $0.35 +52% Jan 31 285.7 +71% $0.41 +46% Apr 30 366.1 +109% $0.52 +73% Jul 31 457.5 +129% $0.57 +68% Notice in particular how sales have been accelerating into the triple-digit range. The P/E, at 15, is far far below what one would expect for a company growing so fast. A great deal of growth slowdown is thus already factored into the low stock price. Competition has been heating up for years in the low-cost PC business, and Dell has managed to grow like gangbusters in spite of it. Can they continue to thrive in the face of competition from IBM and Compaq? I suspect so. The next earnings report is due out Nov. 21. ---------------------------------------------------------------------------- The Aggressive Trader is edited and published at irregular intervals, but at least monthly, by Kenneth L. Deen ("Ken Deen"), P.O. Box 4791., Santa Barbara, California 93140, (805) 565-2039. Until further notice, it is being distributed at no charge. Ken Deen, his employees, affiliates, and/or clients may have positions in securities recommended herein and may make additional purchases and/or sales in these securities. Recommendations made in this publication involve a high degree of risk and may result in losses. Readers should not assume that recommendations will be profitable or will equal past performance. The information in this publication is collected from sources believed to be reliable, but neither the accuracy nor the completeness of this information is guaranteed. Reproduction in whole or in part without the written consent of the editor is strictly prohibited. The Aggressive Trader, Deen Earnings Surprise Index, DESI, DESI-3, and DESI Trading System are all trademarks of Kenneth L. Deen. Copyright (c) 1992 Kenneth L. Deen. -END-