Apple has quickly risen to becoming the most valuable company in a matter of months and rightfully so. They're a company with absolutely amazing fundamentals and extremely strong growth potential. The stock closed Wednesday evening at $546.08, at only a trailing P/E of 13.31 and a forward P/E of 10.13.
A few factors to consider:
- Average price consensus for this year: $708.45
- The earnings for the next five years are projected to grow at an average rate of 18.92%.
- Apple's PEG ratio is only at 0.70, indicating an undervalued stock
- ROA: 31.42%
- ROE: 47.1%
- ROI: 40.76%
- Gross margin: 43.95%
- Operating margin: 35.69%
- Profit margin: 27.13%
Smartphone sales have dropped about 2% this quarter, largely attributable to the pent up demand for Apple's iPhone 5 release this coming fall. Apple sells innovative, intuitive, and stylish products that people want and how they want it. There is a large pipeline of products in the making, including the much rumored Apple TV and iPad mini.
Currently, hedge funds have begun profit taking on Apple's stock, which may explain much of the downward pressure we've experienced lately. I have a long-term outlook on Apple's stock and see it as a stock with much room to grow.
If you're interested in more in-depth analyses of Apple, view these articles:
- Apple: Weighing Bullish, Bearish Arguments Supports Long Case
- Apple's True Value To AT&T and Verizon
- Apple Vs. Samsung and Google?
This is no longer a "dead money" stock. It's true that in the past decade, Microsoft has seen relatively null movements in the stock market. It's the sort of stock we would see in IRA accounts that paid a constant dividend to retired citizens. No longer though is Microsoft a "boring" investment.
Historically, Microsoft has had a very difficult time penetrating the lucrative mobile and tablet markets with their Windows platform. I believe, though, that their upcoming Windows 8 release will generate different results than what we've seen historically. The Windows 8 platform is unique in that it's the first, and most aggressive, attempt at fully integrating any "smart" device. Its platform utilizes cloud technology which synchronizes your phone, tablet, pc, netbook, laptop, and any other device that can operate on the Windows platform. Competitors, like Google (GOOG) and Apple, have taken incremental steps in creating a fully integrated system, but Microsoft has taken the most aggressive stance.
We've seen Microsoft rebound from failure, like with their Windows 7 release after the Vista fiasco. I believe that Windows 8 will be Microsoft's rebound from their current platform.
For more in depth articles on Microsoft:
- Microsoft: No Longer a "Boring" Investment
- Microsoft: Undervalued With Strong Growth Potential
- Just How Risky is Microsoft?
Chesapeake Energy (CHK)
I'm fully aware of the current storm surrounding Chesapeake Energy; much of which stemming from poor corporate governance. Shareholders have experienced bad news after bad news, starting with the Founder Well Program and leading to the most recent cash flow crunch. CEO McClendon has assisted fairly strongly in Chesapeake's 26.6% stock devaluation in the past month. In the past few months, he's made many questionable actions against shareholder's best interest.
I believe, though, that Chesapeake Energy has become an overly battered stock in response to the storm of bad news. Yes, they're facing short-term liquidity issues, but have eased short-term liquidity with a $4 billion loan from Goldman Sachs Bank (GS). Also, we're experiencing a rally in natural gas prices, increasing by 33% from a decade low.
Depressed natural gas prices have hurt Chesapeake's cash flow and will continue being an issue throughout at least 2012, even amid large coal-natural gas switching which will drive up natural gas prices. The average consensus for Chesapeake's earnings in 2012 is $0.62 and $1.86 in 2013. Many are viewing natural gas as the next viable fuel source. It's a clean burning substitute to oil and we have it in abundance in America. We've experienced Federal and State level support for natural gas, including from President Obama in his State of the Union address. Natural gas will likely become our next widely utilized energy source and be used in transitioning America from being an energy importer to an energy exporter; with Chesapeake Energy positioned as the second largest producer of natural gas in America.
I want to emphasize that this stock isn't for the weak stomached. With multiple ongoing internal and external pressures, including a currently informal SEC investigation, Chesapeake Energy is headed towards a roller coaster. I see much value in natural gas and have a steep risk tolerance, so I'll be holding my stake in Chesapeake Energy. This isn't the stock for everyone though.
For more articles on Chesapeake Energy:
- Why Chesapeake's Low Price Is The Right Time To Buy
- It Is Chesapeake's Board Of Directors That Needs To Go First
Disclaimer: please read my standard disclaimer for my articles here.