Skip to main content

Dell Announces Share Buyback Despite the Stock's Underperformance

September 14, 2011

Shares of $DELL are up a little this morning after last night's announcement that they are repurchasing $5 Billion worth of Stock. In this age of innovation these guys really couldn't think of anything better to do with their cash than buy back their garbage stock? Really?? Talk about putting good money after bad.

Look at this chart - the bottom of it shows the performance of $DELL shares relative to the S&P500 ($SPX). What a disaster this has been. Good market or bad market - $DELL consistently underperforms.

I see no reason to buy this stock, yet. The first thing we want to watch for is some sort of out-performance. If we see penetration above this declining trendline in the $DELL:$SPX ratio, then we'll watch a little closer. The next thing that we want to see is the stock get back above this trendline that was broken on the price chart. Since the bottom in 2009, $DELL had been making higher lows and higher highs but recently broke below that trendline.

Looking out into the future, there is a defined level of resistance right around $17.50. Break through there and hold it and then come talk to me. Meanwhile, go check out what some of these analysts had to say this morning: $GS says to sell it, $UBS is somewhat indifferent, and Barclays and Merlin also had some comments. See the WSJ article for more.

 

Source:

Dell's Cash Giveaway - Analysts React (WSJ)

Filed Under