The decline of Dell

Dell stock is down another 6% today, reaching lows not seen since the economic crisis; before that, you have to trace back to 1997 to match their current share price ($11.57 as of this writing). A “buy and hold” investor from 1997 to today would have seen a 15 year performance of precisely zero in their Dell investment. Fortunately, not many people are 15-year investors in equities these days.

I will post a lifetime chart of Dell:

Dell did mostly nothing in its first year and a half in its public existence, but as the chart depicts, the real meaty part of the growth curve was between 1995 to 2000 when an investor would have multiplied their money by 75 times. Catching this part of a company’s trajectory is the most profitable.

Of course, this is not going to happen now with Dell – the PC cycle is long since done and the company is mature. The question for an investor is – what other types of companies out there are selling products that will become as popular as PCs, and when will they have this type of growth curve? There is one that I have in mind which I have invested in where there is a feasible Dell-like scenario.

Companies in their pre-explosive growth curve typically have smaller market caps (e.g. under a billion). Cases like Apple (where they have already been public for a considerable period of time, having gone through a few product cycles) are relatively unusual.