Unveiling the Power of Fundamental Momentum
When discussing stocks, the term “momentum” often enters the conversation, alluding to a domino effect where buying triggers more buying, and selling prompts additional selling. For short-term traders, riding this momentum wave can prove profitable, with the strategy of buying high and selling higher proving fruitful within minutes or days.
The Nuances of Long-Term Investing
However, for long-term investors, the challenge lies in pinpointing when this momentum will shift. Holding a stock for months or years necessitates identifying momentum early, as by the time it becomes apparent, much of the stock’s value may have already been realized.
Embracing Sustained Momentum
Yet, another form of momentum exists – fundamental business momentum. This type of momentum stems from a company’s successful products or services, leading to a cascading effect of continued success. The most enduring momentum arises when technical signals align with fundamental business aspects, a synergy that Dell Technologies (DELL) is currently experiencing.
The Ascending Trajectory of Dell
Dell’s technical momentum is unmistakable, with the stock surging by 193% over the past year, vastly outstripping the S&P 500 tracking ETF, SPY, which posted a 26% gain. While such robust growth might typically signal a sell-off for many investors, the burgeoning fundamental momentum within Dell suggests that the best is yet to come, making it an attractive buy at its current levels.
AI: The Driving Force Behind Dell’s Surge
Often overshadowed by titans in the tech industry, Dell’s legacy lies in PC and printer manufacturing. However, its venture into AI-capable servers has positioned the company as a prominent player in this emerging field. Securing a substantial Tier 2 CSP AI server contract, estimated to yield $2 billion in revenue by Morgan Stanley, marks a pivotal win for Dell.
This triumph not only bolsters Dell’s financial standing but also sets a gold standard in the realm of AI servers, amplifying its appeal to smaller businesses seeking to integrate AI capabilities. Dell’s trajectory mirrors that of Nvidia (NVDA), a key supplier, yet with DELL’s forward P/E significantly lower than NVDA’s, there remains significant upside potential in the stock.
Charting the Future of Dell Technologies
While Dell may not replicate the explosive growth witnessed by Nvidia in recent years, there remains no indication of the stock’s momentum waning. Positioned at the intersection of technical and fundamental momentum, Dell emerges as a prime candidate for investors seeking to capitalize on the burgeoning AI wave.