Sports fans will all agree that this time of year just feels like the onset of fresh battles and important clashes, but this sense applies to investing as well. As companies push through September and gear up for the fourth quarter, the buy-in-May-and-go-away crowd returns to the fray as well. With that in mind, what follows is a discussion of the critical battles between some of the most iconic brands in the market:
Apple (AAPL) & Google (GOOG) - With the September 12th unveiling of the iPhone 5 growing ever closer, this battle is perhaps the most watched in the country. Google's Android ecosystem, which took over as the most used choice, should be under direct fire with this new launch. Some analysts are predicting that the new device may sell as many as 250 million units during its lifetime, which bodes well for Apple's ability to recapture some of its lost customers. The launch has repercussions for iPhone 5 suppliers, like Qualcomm (QCOM) and Broadcom (BRCM). While initial orders from Apple may already be priced into the shares of these companies, most will likely see the benefits for many quarters. For its part, Google continues to stoically march forward and demonstrate why it is one of America's premier organizations. If one needs to declare a winner, this round is going to Apple. If the launch is anything less than a disaster - a near impossibility - the company should put up some huge sales numbers.
AT&T (T) & Verizon Communications (VZ) - It is difficult to seriously consider the release of the iPhone 5, without looking to the battle between the carriers. In AT&T's corner is its proven ability to retain customers and its blazing speed in the areas it covers. In Verizon's corner is its breadth of coverage - by year-end, the company's 4G LTE network will cover 260 million people as compared to the 80 million currently covered by AT&T. Those who favor AT&T appreciate the density of its network in urban areas, leading to faster speeds. Investors in the Verizon camp counter by pointing out that customers pay for access, not network density and 260 is simply larger than 80 no matter how you slice it. The wild card in this battle is Sprint Nextel (S), the only carrier that continues to offer unlimited data plans. The company has the potential to cut into the customer bases of both AT&T and Verizon as data becomes increasingly important. Still, at least for now, Verizon looks to be leading this battle.
Chipotle Mexican Grill (CMG) & McDonald's (MCD) - This is a particularly interesting battle when one considers that McDonald's used to be Chipotle's corporate parent. On McDonald's side is its nearly $92 billion market capitalization, its 3.1% dividend yield, its ability to break into new markets and its developing ability to convince people it is becoming a healthier option. On Chipotle's side is the fact that the company can continue to drive ahead without the need to rebrand - it is already seen as the healthy choice at a time when Americans are deeply concerned with the health profile of their food. Also in Chipotle's favor is the growth factor. Chipotle has grown average annual sales over the last five years by 22.5% per annum and posted quarterly year-over-year revenue growth of 20.9%. These figures for McDonald's are 5.25% and 0.2% respectively. Finally, classified as quick-casual rather than fast food, Chipotle gets a few dollars per ticket more than McDonald's. Ultimately, these are both quality companies that are worth owning, so call it a tie.
Nike (NKE) & Under Armour (UA) - As school sports seasons begin to cycle back up, Nike and Under Armour should see decent upticks in sales. Where Nike has reigned as the undisputed king of sports apparel for years, Under Armour is the young growth story that is looking to unseat its biggest rival. With a market capitalization of $45.2 billion, Nike can afford more marketing, more R&D and more patience during quiet times. Additionally, with a dividend yield of 1.5%, Nike gives investors some income during periods of stagnation. Favoring Under Armour is average EPS growth of 18.1% over the past five years and analyst projected growth of 24.6% for the next five. The company has successfully entered the shoe business and should have a bright future over the long-term. That said, with a P/E of 63.4, shares look expensive at current levels. While investors should not lose track of Under Armour, Nike is the better play at current levels.