In this article, I'll likely take some unintended, though unavoidable shots at Apple's feeble competition, but that's not the focus. And, I don't categorize the stocks I highlight as derivative plays. While some of them do business with Apple from time to time, I'm not making the picks because of those associations. Rather, I think each stock could have upside as a direct result of Apple's dominance, not because Apple chooses the company as a vendor, if it even does.
Intel (INTC): On Thursday, I introduced INTC as one of the dividend-paying growth stocks I intend to buy, accumulate and hold in 2012. In the article where I named Intel, I cited something that struck me as curious:
Consider the lead to this recent The Wall Street Journal article on the latest non-answer to Apple's dominance - "ultrabooks."
Intel Corp.'s crusade to redefine the personal computer ... I love it!
Last time I checked Intel did not make computers. It provides the parts that make them run.
The fact that a chipmaker, and not a computer company, must step in and take charge to "redefine the personal computer" just speaks to the woeful state of the industry. Apple remains the only company taking the lead in the space. It forced development of the "ultrabook." It's competitors, sadly, could not come up with anything more original than a cross between a MacBook Air and iPad.
For Intel's part, they're just going along for the ride. And why not get behind the idea of an ultrabook? Just like Research In Motion (RIMM) took a charge on its PlayBook tablet, expect Dell (DELL), Hewlett Packard (HPQ) and the rest of industry to get stuck discounting excess inventory on their latest non-answer to Apple. Intel, meantime, can take very little risk, have its cake and eat it to.
Amazon.com (AMZN): Somebody, probably quite some time ago, said that a rising tide lifts all boats. Vis-a-vis Apple, however, that's rarely been the case. Look to the exceptions for investment opportunities.
While I've noted since late last year that AAPL, not AMZN, represents the right near-term trade, I'm incredibly bullish on Amazon's long-term outlook. Jeff Bezos expertly runs one of the few companies that knows how to coexist alongside an unbeatable beast.
Not only is Kindle Fire all about driving synergy and revenues at Amazon, it sells, in part, because of the existence of iPad. The two devices do not directly compete. Rather, with Fire, Amazon became the first company to provide a viable alternative for people who were probably never going to spend $500 to $830 on an iPad.
If it weren't for Apple, there would not be a Kindle Fire. Apple created the demand - and the hole in the market - that Amazon competently filled. In that regard, Amazon rode Apple's coattails like everybody else does. The big difference, however, sits in the reasons why Amazon did it and how the company went about it. It went into the venture with a sound, logical and coherent strategy, not a pathetic grasp at straws.
Apple created Android, or at least it created the conditions necessary to create Android. People decided they could not play in the Apple way, and they had to do something else. Then Google stepped in there and created Android and others jumped on the Android train.
Apple haters, aka Android fan boys, love to deliver pompus history lessons in response to the Elop quote. They can't handle the truth, even if it is a subtle rewrite of history.
Endpoint - Just like it created apparent demand for ultrabooks and a smaller, easier-to-handle, yet competent tablet, Apple created demand for smart phones. It made the smart phone something that practically every person in the world either owns or aspires to own. It delivered, on a silver platter, almost certain success to any company with an ounce of innovation and a tablespoon of competence willing to step up.
By doing what Apple would never do - opening itself up for mass adoption - Android become the Windows of the smart phone. Without Apple in the picture, it would have a monopoly. RIM would have to rename BlackBerry Ubuntu.
How To Play These Stocks
As I discuss in my basic options eBook, you can come closest to replicating long-term ownership in any stock via options by purchasing in-the-money LEAPS options. This approach works especially well for high-priced stocks like GOOG and AMZN because an option contract costs just a fraction of 100 shares of its underlying stock.
Outside of that strategy, I intend to dollar cost average into INTC on a bi-weekly or monthly basis throughout 2012. On further pullback, I will consider doing the same with GOOG or AMZN or using LEAPS.
Additional disclosure: I intend to open a long position in INTC later this month.