Dueling Fools: Dell Bull

Let me get this out front straightaway, before we begin today's duel.

I own a Dell (NASDAQ:DELL) computer. I own Dell stock. In short, I'm a Dell fan. I'm bullish, I'm biased ... and I'm also right.

Dude, this company rules
If this subheadline sounds somewhat conclusory, there's good reason for that: Dell really does rule. In the computer-hawking business, no one comes close to Dell. Let's take a look at a few of the usual suspects:

No. 2 in worldwide sales, Dell is nonetheless the most profitable computer maker in the world. Yes, I realize that Apple still makes computers. But that company seems to be earning most of its money off iPods and accessories these days -- although some do argue that Apple will try to take on Dell.

Back among the computer powerhouses, Dell reigns supreme. Dell makes the most money. Dell commands the best profit margins. And Dell is expanding its lead over its rivals at an impressive clip. Only China-based Lenovo, for which U.S. analysts do not make earnings projections, might be growing more quickly than Dell. But with Dell's at earnings 22 times Lenovo's profits, Lenovo's not going to grab the pole position any time soon.

Hewlett: No. 2 and falling
Putting aside dark-horse candidate Lenovo for a moment, let's consider Dell archrival Hewlett-Packard and the threat it poses to Dell's supremacy. Now let's stop, because there may not be a threat at all.

The reason: Even Hewlett's respectable 3% profit margin in this competitive business is deceptive -- because Hewlett doesn't make its profits from selling computers. In fact, Hewlett earns more than half of its profits from selling ink cartridges and related printer accessories. As companies such as Staples (NASDAQ:SPLS), Office Depot (NYSE:ODP), and Walgreen (NYSE:WAG) ramp up their projects to begin selling ink-cartridge refills in their stores, Hewlett's going to have its hands full defending its cash-cow business. It won't have a minute to spare fighting Dell for low-margin computer sales.

Gateway to nowhere; the Sun also falls
But what about Gateway and Sun, the No. 4 and No. 5 companies in the computer market? Here you must heed the words of former GE head Jack Welch: "When you're No. 4 or 5 in a market, when No. 1 sneezes, you get pneumonia. When you're No. 1, you control your destiny. The No. 4s keep merging; they have difficult times."

In other words, don't waste your time on No. 4 Gateway and its piddling 1.3% profit margin. The company may survive, but it's never going to "be a contender." And unprofitable Sun? You know better than that.

Foolish takeaway
Listen, I realize that No. 1 computer maker Dell has, as Welch would describe it, "sneezed." The stock's down 27% over the past year. But that's precisely why I bought Dell a month or so back -- because the time to buy the best companies in the world is not when they're healthy, firing on all cylinders, or, well, choose the metaphor you like best. The time to buy a "great business," as Warren Buffett so Foolishly declared, is when it's selling for a "good price." Dell is currently selling for 20 times trailing earnings and fewer than 17 times trailing free cash flow. Its profits are projected to grow 15% per annum over the next five years.

Is that a bargain? No. But it is a "good price," and it's about as close to a bargain as you're likely to find on a company that so clearly outshines its competition.

Buy Dell now. Your portfolio will thank you.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.

Dell has been recommended in both theMotley Fool Stock AdvisorandMotley Fool Inside Valuenewsletters.

Fool contributorRich Smith owns shares of Dell but not of any other company named above. The Motley Fool requireswriters to disclose their long and short positions in any company we write about and to refrain from trading in any stocks we write about for 10 days before and 10 days after publication.