Cash-rich tech stocks such as Dell
Dell is continuing its tradition this fiscal year. The company announced yesterday, in advance of today's annual analyst meeting, that it has repurchased $1.6 billion in stock this year and intends to purchase $400 million more by the end of this fiscal year, ending January 2012. That's a grand total of $2 billion, or the equivalent of paying a juicy 6.5% dividend for 2011.
As a shareholder, I'm happy about this.
You may ask why, since I'm known to be a skeptic of dividends and, by extension, buybacks. And the answer is simple: I think Dell is grossly undervalued, something I've written about lots of times. Shareholders always benefit when management throws money at projects with abnormally high risk-adjusted returns …including its own shares. Cisco, I might add, should step up the buybacks for the same reason.
If Dell's shares (or Cisco's) were overvalued, I'd be the first to rally against their buybacks. But they're not. Thus, I'm a happy Fool, at least for today.
Going after Apple?
Some pundits and analysts are doubtlessly waiting with bated breath to see what Dell has to say today about Apple's
Well, I couldn't care less. I've played with the iPad 2 in stores, as well as Research In Motion's
I think Apple and Dell will ultimately coexist peacefully in the tech world, with Dell sticking to enterprise and commoditization and Apple sticking to consumers and innovation. Dell will imitate successfully, and Apple will (maybe) continue to innovate successfully.
It's the circle of (tech) life!
Fool contributor Chris Baines is a value investor and owns shares of Dell. His stock picks and pans have outperformed 85% of the other members on Motley Fool CAPS. The Motley Fool owns shares of Apple and Cisco and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Cisco and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insight smakes us better investors. The Motley Fool has a disclosure policy.