Apple, Walmart: Growth Stocks on the Move 15 comments
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Apple (AAPL) and Wal-Mart (WMT) are two of the all time great growth stocks. Both stocks are on the move, again. Over the past 6 months, Wal-Mart is up 22% while Apple is down 4%, but over the past month Apple is up 25% while WMT is up only 10%. Pick a long time frame and you can understand how the Walton Family became the richest in the world, however, in the last 5 years, WMT is up only 2% while Apple is up 1,996%!
Apple is currently hot because the store shelves of the old 2G iPhone have been depleted. The expectation is that the 3G model is about to arrive. Another reason for the heat is that iTunes just took over Wal-Mart as the number one seller of music.
While it might be easy to conclude that Wal-Mart is "old school" and Apple represents the "new economy", the past is known but the future is not. We only get to guess at the future.
WHAT IS BIGGER THAN A CELL PHONE BUT SMALLER THAN A LAPTOP?
We know that scores of new wireless computer devices are in various stages of design. We know that high speed networks are in various stages of construction. We know that substantial traffic growth is occurring in streaming video. We know that Qualcomm (QCOM) is offering mobile video services in more markets. We know that Google's(GOOG) new "phone" software is likely to be available on scores of new devices but we do not know what services will be required to qualify "for the brand name".
We know that Research In Motion (RIMM) has out performed Apple by 2 and a half times over the past 5 years. The RIMM performance tells us that businesses have and will invest large sums of capital to wirelessly connect their employees. Google, at 535% appreciation since going public, has increased its value at only about 10% as much as RIMM. Qualcomm, one of the huge leaders of the prior boom has only seen 144% appreciation in 5 years.
Intel (INTC) is up 25% over 5 years while the big cap drug stock Pfizer (PFE) is down over every period for the past 5 years, including down 34% for the entire term. Wachovia Corp. (WB) is in the same boat as PFE but to be fair to these two companies it should be mentioned that they have each paid out substantial dividends over the years and that their current yields are 9.8% (WB) and 6.1%.
HIGH PRICED GROWTH DOES NOT ALWAYS LEAD TO HIGH PROFITS.
Every dog has its day. John Maynard Keynes, one of the most successful investors of all time, had an interesting way of looking at stocks. He compared buying stocks to guessing which of 30 beautiful women would win a beauty contest. The winner of the guessing game was not the person adept at identifying beauty, but rather the person who identified the taste of the guessers.
Apple is believed to be beautiful by the many, whereas the public opinion of Wal-Mart, PFE or WB is not what it used to be. In the case of Ford Motor (F), the opinion has gotten so low that jokes are being made about the company.
The problem is that Keynes was a rare person in a former time. Today, we do not know of people who can accurately predict the "taste of the guessers". Warren Buffet has showed time and again that the path to investment success today is to buy for the longer haul. Buffet would not consider buying AAPL because the price discounts high growth way into the future. You have to be pretty darn sure that AAPL will continue to grow very fast for a very long time if you want to buy it for a hold, or you have to guess when to jump off the moving train if you what to buy for a short term trade.
Steve Jobs has without doubt done a good job of building the Apple brand. I still have trouble seeing extremely high profit growth for the hardware side of Apple accompanied with rapidly falling prices and substantial competition from all corners of the globe. OOPS! I must confess. My 2 year old grand daughter owns a few shares of AAPL and it is my hope that she holds them for all of her life.
I feel very comfortable buying into the old dogs (Wachovia Bank, Ford, Wal-Mart, Pfizer). I believe these stocks are cheap relative to their earnings potential. I believe the public disdain for them is a contrarian signal that screams the word BUY. One of the old pros of the newsletter business (I'm having a senior moment and cannot remember his name), just made a contrarian airline call. Here again, I am confident that patient investors will do well. I have less confidence in AAPL at a time when it is one of the top performers.
THROWING DARTS WILL WORK
The turn in the transportation index tells me that good economic times are just around the corner. Preceding and during these good times, almost all stocks will "work". Lagging indicators, such as the decline in jobs, are also screaming that it is time to be 100% invested in stocks.
Gold, oil and the dollar continue to gyrate in synch with the news out of Iran/Iraq. Amadenijhad is determined to build nuclear power while Nato is gearing up to build an anti-ballistic missile system. Meanwhile the Iraqi government continues to try to consolidate its power. In the short run, the jumping around of gold, oil and the dollar are like the Keynes beauty contest. In the long run, the actual real supply and demand will reset prices. While the potential for conflict in Iran is real, it is not likely to come to all out war.
The build-out of high speed "phone networks" is happening in the US no matter what is happening in Iran. The market upturn will not be sunk by the short term gyrations caused by the potential conflict with Iran. As the people of Iran fall further behind in the availability of Apple iPhones and goods and services at low prices from Wal-Mart, the pressure will intensify to cooperate with the UN and the US.
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This article has 15 comments:
Nowadays seekingalpha is dominated by Apple fanboys and short term traders. Amidst all those articles, this article brings sense back.
Wachovia - I continue to be bearish on banks. I'd rather wait a few more months before putting my money here
Ford - If you're a contrarian, perhaps it is time to buy here, the company has been beaten down so much already
Wal-Mart - Bad times tend to be good for WMT, I see bad times ahead - consider it a buy
Pfizer - Lipitor's coming off patent in 2010, lack of drugs in the pipeline, relatively inefficient internal processes versus other big pharma. For now this is a sell for me; I'd like to see PFE get its act together before giving it a buy signal
I know, and most everyone else knows Antie is correct. Apple will be $86 again, most likely by year end.
After it splits 3:1.
Ignore innovation, customer loyalty, world changing technology, and go seeking old dying dogs that are struggling to even get the BASICS of their business, like lending money for a bank, or handling employee's with respect for WalMart. And when they are beaten down for gross incompetance to levels approaching trash blowing down an alley, LOAD UP ON 'em hard, cause those old dogs just can't go much lower?
Reminds me of the 25 years of my investing with mutual funds. Trusting those "pro's" to handle my sons college funds. Yep, go with the Best...at the time, FIDELITY, invest with the TOP companies in America...the BLUEST OF THE BLUE CHIPS. How can you go wrong with PROfessionals owning PROfessionally owned TRUSTED OLD firms?
Let me tell you how.
After 16 years, faithfully investing EVERY MONTH, the same amount, through thick and thin, my "PROfessionally run" BLUEST BLUE top firms have managed to ALMOST return the money invested at ALMOST the same purchasing power as the day it was invested. Yep, 16 years of SQUAT.
And a hot shot firm, that breaks the rules, tells wall street squat, has millions of rabid fans, earns me enough in three years for four years of college?
And your advice it to go pick over the trash heap of the dying dogs for the one that MIGHT survive, recover enough to die again over over and over?
Sorry.
I'm going with the crazy guys in the blue jeans, and black turtlenecks.
Well said!
Warren Buffet's style of investing WAS good. Buffet owns only a handful of companies in his portfolio. Unfortunately, America needs more to invest in than just insurance, beverages, furniture, and fractional aircraft shares.
If we don't invest in future technology companies, we will be left sitting on our LazyBoy recliners, drinking coke, and praying that our life insurance company doesn't go bankrupt before we die.
Oh, we won't be using the NetJets fractional shares for our vacation because it lost $80 million last year, and aviation fuel costs are going hyperbolic.
iphone and mac's are high end, while vista laptops have a larger price range of models to choose from, more retail users would probably like me choose the lower price range model since it is suitable for most of my needs.
They have no problem selling the pricier mid to high end stuff, so they don't promote the low end stuff because they only want to sell those to people who can't afford an iMac or Touch, etc.
Stop in and FEEL the excitement.
Not convinced? Compare the atmospherics and cutomer support in an Apple store with any other retailer selling some or all competitive products. Be sure to compare the competencies of the retail sales staff re tech details and help for buyers to mitigate perceived risk.
I can't think of any manufacterer -in any industry-that has successfully integrated forward to retail in the last 5 decades. Now 200 locations and more to come including off-shore.
And then there is the huge boost Apple will continue to enjoy due to the buying power of the Euro vs Dollar. And now European Tourists are buying bargains at US Apple stores.
And of course Apple has saturation distribution of all other retail strategies.
Apple OS X is cool... Vista is a drag
So what does everyone see as the future for new energy stocks, such as solar, wind, geo-thermal, etc.?
Biggest player(solar) in the US is SPWR and in China STP....While the biggest overall player in the world is Q Cells which is not traded in the US it is a german company with a JV with ESLR an american based firm(Mass.)..I personally do not like ESLR though they grow way to slowly and unprofitable if you want to look at a small solar...
Take a look at CSIQ a Canadian based firm with Chinese background this company is quiet small and look at their growth rates they are trading at a forward P/E of 11...which is just absurd that stock will be in near future trading at 30(at least)..another intresting fact concerning CSIQ is that the forecast doesn't include the new panels which go into production in Q3...for more information concerning CSIQ you might want to do some more research yourself...the conference call last quarter was quiet interesting...
For wind i like Nordex also a German firm...which did not have that good of a year so far due to some delays in projects but the books are full...so worth taking a look
In summary, Renewables are the way to go...i jumped on the train a couple years ago due to the fact that the markets for renewables is only going to expand greatly it is in an infant stage so their is still a few risks but opportunities outweigh these risks vastly...So far most companies just make their money predominatly in Spain and Germany...With a bit to be made Greece, Italy, USA, Asia, Australia...But those are still such small markets...Once the tax credit extension comes in the US that market will grow faster as well and other markets will become bigger as well next year...Furthermore if a democrat wins you better have some green stocks in your portfolio or you are missing outon great returns...Their is still a lot of catching up to do in the US...the Green Wave will reach your continent as well:)
With Kind Regards from Germany,
Dicki
Disclosure: Long STP, Long Nordex, about to go Long CSIQ