I did a series of Apple (NASDAQ:AAPL) articles last quarter that mentioned how the company was turning from an electronics manufacturer, to more of a cultural 'cache' standard I was watching 'Cavuto' a few weeks ago on the new Fox Business Channel, and one of the icons of 'cool' Diddy was hawking his new line of vodka, and the host asked him where he wanted to position the brand - the answer was "I want my brand to be thought of like Apple" - just anecdotal commentary but much like Nike (NYSE:NKE) in the Jordan years, when sneakers were the be all and end all. Apple is turning into far more than just a seller of product. I have been thinking that I was very lucky to be able to buy this stock of late around $160, and have taken the position up to 2%+ of the portfolio. If there were not so many other names on sale, I would have an even higher concentration in this name.
While everyone likes Google (NASDAQ:GOOG), I still think there is some potential risk from advertising slowdowns in the coming year, whereas Apple is simply a freight train. In fact, during last quarter's report, the company actually guided above analysts expectations, which for this company which usually always lowballs the guidance, tells you all you need to know.
I just came upon this article regarding the Apple shopping experience, and just reading it makes you want to get out to a store to experience it. This is, as we say, a game changer.
There is not a cash register is in sight. The electronics on display are all powered up and ready for use. Personal trainers, specialists and newly minted concierges in aqua blue shirts make the Apple Store feel part salon, part Internet cafe - just without the espresso. Over the past year, Apple Inc. has revamped its 201 stores, changing the layout, adding services and increasing its staffing. The "concierge" service that Apple launched last week is only the latest initiative designed to draw more visitors and bolster already record-breaking sales. Clipboard-carrying concierges greet customers at the door to direct them to the right section of the store or to the personal shopper or trainer with whom they had made an appointment. With cash registers removed, a common question nowadays is, "Where do I pay?" The store employee would instantly reply, "Right here," and whip out a portable scanner from a hip holster. Receipts are e-mailed on the spot or, if the customer prefers, a paper version emerges from printers hidden underneath display tables. It's not uncommon to find people dropping in to hang out, use the Internet or let their children play on the Macs on low-legged tables. Personal blog entries, complete with snapshots of the authors in the store, are sometimes written on the spot. "We try to pattern the feeling to a 5-star hotel," said Apple's retail chief, Ron Johnson. "It's not about selling. It's about creating a place where you belong." The retail stores hosted more than 100 million visitors and produced about $4.2 billion in revenue in Apple's fiscal year that ended in September, up nearly 24 percent from $3.4 billion the previous year - in line with the Cupertino-based company's overall sales growth. Apple says that more than half of the computers sold at Apple stores are to people new to the Macintosh platform. After hovering for years with a 2 percent to 3 percent share of the PC market in the United States, Apple's slice has now grown to 8 percent, according to market researcher Gartner Inc.
I do believe both Google and Apple will be the de facto "entertainment" twins in the coming years, intertwining themselves in all pieces of the digital convergence. While I do hold a position in Google, and thus far it's been immune from any slowdown (along with simply dominating it's competitors and taking more market share by the month), it's a bit more tied the corporate sector (i.e. advertising), whereas Apple is tied to the consumer (until the day that enterprise starts buying Macs en masse). While the consumer is slowing one area they will voraciously eat up is gadgets - we saw this last Christmas. So in many ways I see less near term (6 to 18 months) risk from the economy with Apple than I do with Google. Strange I know.
Technically, Apple has held the 50-day moving average ($163-$164), a key technical support level, throughout this sell-off. Granted, if we have utter giving up in the market, Apple will not be immune but thus far in the face of a serious correction, the stock has held its ground. But any sell-off will not be due to fundamentals, as this company continues to hit on all cylinders. Much like Nike, we have a brand that due to design prowess and cool cache, can sell very similar product for very large premiums compared to competitors. This leads to margin expansion and profits, profits, profits. If we could get some benign market action over the next 6 weeks, I think we will see Apple north of $200 as we enter the New Year. As a matter of fact, I am so confident in the gadget play thesis for Christmas, that I am going to start a position in Best Buy (NYSE:BBY) early next week as well.
Disclosure: The author is long Apple, Google in fund, but has no personal position.
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