Dell Computers (DELL-N)

(A Top Pick Oct 18/22, Up 8.6%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with DELL is progressing well. To remain disciplined, we recommend trailing up the stop to $33.

Stockchase Research Editor: Michael O’Reilly Yes, computer system sales are down from previous year across the industry, but that was following sizeable pandemic led demand growth as remote working accelerated. DELL trades at only 5x book and has been prudently using some cash reserves to retire debt and buy back shares. It’s dividend is backed by a payout ratio under 25% of cash flow. We recommend placing a stop-loss at $27, looking to achieve $55 — upside potential over 59%. Yield 3.8% (Analysts’ price target is $55.21)

Once a big player in desktop PC's, Dell fell off the radar of investors in October 2013 when it went private, then quietly returned to Wall Street in July 2018. In mid-July, Morgan Stanley upgraded Dell from $50 to $68 price, from equal- to overweight, after Dell announced it was exploring options concerning its US$50-billion, 81% holding of VMware, which gives Dell a stake in the cloud computing industry. The Morgan Stanley analyst praised Dell's market share gains, de-levering efforts, simplified ownership structure and recent peer multiple expansion. Dell plans to spin-off its stake in VMware, though not until September 2021. Dell could monetize that investment and give the spun-off entity room to grow faster. Currently trading at a reasonable 10.3x PE, Dell shares have doubled since the March 23 bottom to touch $60/share, which was its price target. Of the last four quarters, Dell beat the street three times, and barely missing its Q1 by two pennies. The stock has three strong buys, five buys and nine holds. Typical for a tech stock, Dell pays no dividend.