Bill Nygren on DELL
When we started managing The Oakmark Fund we viewed Dell as one of those great businesses that was unlikely to ever get priced cheaply enough for us to own it. In March of 2000, Dell stock peaked at $60 – a robust 88 times trailing earnings. Dell’s business has performed well since then, with sales and EPS both more than doubling. Dell’s stock, however, hasn’t done so well, now selling for just half the price it did six years ago. The world’s largest manufacturer and distributor of PCs is now priced at less than 16 times expected 2007 earnings. At this price, Dell is selling at only a slight premium to the average company’s P/E multiple, and it actually sells at a discount after adjusting for its large cash balance. We think Dell’s brand name and low cost structure will provide an enduring competitive advantage that will allow the company to continue growing faster than most businesses, which will warrant the stock selling at a significant premium.