11 Stocks That Could Outperform Apple Shares (Part 1)

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 |  Includes: AAPL, ATPAQ, EXXI, OVTI, UAL, XRX
by: Rougemont

I know that saying a stock could outperform Apple (NASDAQ:AAPL) will rub many investors the wrong way, so let me start by saying I think Apple is a great company and a solid investment. I would even buy Apple stock on any meaningful dips. However, the Apple story is very well know by now and while the stock still has upside, it will be very hard for Apple shares to rise as much as they have in the last 2 to 3 years. In January 2009, Apple was trading for less than $100 per share and it has nearly quadrupled since then. Thanks to very high consumer demand for their products, Apple can continue to perform well even if the economy dips as it appears to be doing now.

However, if we don't see a major economic recession, there are quite a few stocks that are tremendously undervalued which could outperform Apple shares. Part of this is due to the fact that expectations are very high for Apple and very low for many other companies. The other factor is that the law of large numbers is starting to become an issue for Apple. It's typically easier for a $10 stock to double in a year or two, than it is for a stock near $400 to double to about $800. From a market capitalization metric, it is also harder for a company like Apple, valued at about $353 billion to double to around $700 billion. It's probably not going to happen anytime soon, because that is such an immense sum of money. With the bar set low for other companies, and if the economy does not suffer from a significant recession, these stocks could easily outperform Apple stock. Here is a look at Apple and the other stocks:

Apple, Inc. (AAPL) shares are trading over $381.03. Apple is a leading maker of computers and mobile devices. The 50 day moving average is $369.72 and the 200 day moving average is $345.31. Earnings estimates for AAPL are about $27.41 per share in 2011 and $32.12 for 2012. The 52 week range is $235.56 to $404.50. Apple is a great company and will probably continue to be a solid investment for the foreseeable future. The market cap is about $353 billion.

These stocks could outperform Apple shares in the next year or two, if the economy does not suffer a major recession:

United Continental Holdings Inc., (NYSE:UAL) shares are trading at $18.41. United is a major global airline. The 50 day moving average is $19.85 and the 200 day moving average is $23.36. UAL is estimated to earn about $3.57 per share in 2011 and $4.98 in 2012. This puts the PE ratio at just over 5. Book value is listed at $5.80 per share.

Why United shares could outperform Apple shares: With United shares selling for less than 4 times 2012 earnings estimates, it looks like a bargain. A little good news on the economy and a more stable stock market could send these shares much higher. Oil prices have been dropping and that is a huge plus for lowering the fuel costs of this major airline.

OmniVision Technologies (NASDAQ:OVTI) shares are trading at $17.56. OmniVision sells the Camerachip sensors used in mobile phones and other computer devices. The 50 day moving average is about $28.21 and the 200 day moving average is about $30.11. These shares have traded in a 52 week range between $16.61 and $37.04. Earnings estimates for OVTI are about $2.93 per share in 2011.

Why OmniVision shares could outperform Apple shares: This stock plunged last week when the company lowered guidance leading some to wonder if this was over whether or not Apple would still keep OmniVision as a main supplier. You can read more about that here. Even if Apple reduces order with OmniVision, the stock is too cheap and still has rebound potential.

ATP Oil and Gas Corp. (ATPG) is trading at $12.87. ATPG is an independent oil and gas company, based in Texas. These shares have traded in a range between $6.26 to $21.40 in the last 52 weeks. The 50 day moving average is $13.44 and the 200 day moving is $16.55.

Why ATP Oil and Gas shares could outperform Apple shares: Earnings estimates for ATPG are expected to go from a loss in 2011 to a profit of $1.69 per share in 2012. The higher revenues and profits for 2012 are due to higher production coming from oil wells in the Gulf of Mexico. Read more on that here.

Xerox, Inc., (NYSE:XRX) shares are trading at $8.11. Xerox is a leading maker of document equipment, software and related products, and is based in Connecticut. The 50 day moving average is about $9.14 and the 200 day moving average is $10.31. Earnings estimates for XRX are expected to be $1.07 for 2011 and $1.24 for 2012. The book value is $8.93 per share. XRX pays a dividend of 17 cents per share which is equivalent to a 2.1% yield.

Why Xerox shares could outperform Apple shares: Xerox is very undervalued at only about 6 times 2012 earnings. Xerox is responsible for many incredible inventions and technological advances through their subsidiary called "PARC" or "Palo Alto Research Center" and the market does not appear to be fully valuing the potential here. Many consider Xerox to just be about copy machines, but there is much more to this company.

Energy XXI (NASDAQ:EXXI) is trading around $26.30. Energy XXI is an independent oil and gas company, based in Bermuda. These shares have traded in a range between $19.62 to $37.20 in the last 52 weeks. The 50 day moving average is $29.92 and the 200 day moving average is $30.57. EXXI is estimated to earn about $2.58 per share in 2011 and $4.20 in 2012.

Why Energy XXI could outperform Apple shares: This company should see better results as waiting times and regulations for drilling permits in the Gulf of Mexico improve. This company could be a takeover target for a larger energy company.

The data is sourced from Yahoo Finance and Insidercow.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.

Disclosure: I am long ATPG, XRX, UAL, OVTI. I may buy all of these stocks soon.

Continue to Part 2 >>