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Richard Evans spent 21 years in the military, Business and Management as well as marketing within the retail, transportation and health care fields. He now lives in Ecuador while teaching business and communication subjects at Blue Hill College. He writes extensively, having several hundred... More
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  • Which Is The Best Big Internet Or Tech Stock To Own For 2013?

    For the year, the tech sector is up 18%. This despite a sharp sell off in recent weeks. I still see the tech sector as one of the highest-growth sectors, with many top performers delivering strong and rapid growth. The sector is worth trillions of dollars, with a number of fast-moving companies attracting the attention of investment managers with their strong fundamentals, even as many of their sky-high share prices can make others gulp.

    Many tech stocks are one shot wonders, rolling out a new technology, and they become shooting stars. But all too often their rapid ascent is snuffed out when they begin to transition to a new,more mature businss stage filled with competition. Mature tech stocks that have been providing magnificent total returns to investors in the past are well worth investing in, as these companies have learned the art of constant innovation and repositioning according to the dynamic environment.

    I looked at four of the very biggest to see which looks to have the brightest future for 2013: Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Google Inc. (GOOG) and Intel Corporation (INTC).

    Amazon.com Inc.

    Financials: Amazon's recent closing price was $237.56, within a 52-week trading range of $166.97 - $264.11. Amazon currently trades at a Price to Earnings ratio (PE) of 2,828.10 with an earnings per share of $0.08. The Company has a current ratio of 1.04. It has profit margin of 0.07% and operating margin of 0.93%. The company pays no dividends

    AMZN Chart

    AMZN data by YCharts

    Profile & Recent News: Amazon is one of the largest online marketplaces, having grown originally from merely selling books, tapes and movies to now almost anything. The company has been investing heavily into activities like digital publishing, which is mainly why earnings have fallen. The online retailer also has offered some users membership to its subscription-based shipping and streaming service for a monthly fee, intensifying competition with media rival Netflix Inc. (NFLX).

    Amazon also manufactures and sells Kindle devices. European Union regulators are set to end an antitrust probe into e-book prices. The Eu is expected to accept an offer by Apple and four publishers to ease price restrictions on Amazon that allow it to sell e-books cheaper thanits rivals in the fast-growing market. However there is lots of competition and Amazon is already slashing its Kindle prices, by 5% to $100, in Japan before it has shipped a single device.

    A stronger 3Q report cheered investors while the company is expected to benefit from a healthy online holiday shopping season, expected to increase sales by double digits, year-over-year. However as the eye-popping PE ratio attests, Amazon has not found a way to turn its new era investments into profits. If it can, then its stratospheric share price is worth it. However I would want to see more evidence that the new business models are actually performing before I would advise investing.

    Apple Inc.

    Financials: Apple's recent closing price was $547.06, within a 52-week trading range of $363.32 -$705.07. The company currently trades at a Price to Earnings ratio (PE) of 13.20 with earnings per share of $44.15. Apple has a current ratio of 1.50. It has profit margin of 26.67% and operating margin of 35.30%. It declared a cash dividend of $2.65 per common share, payable on November 15 to shareholders of record as of November 12, annual yield on the dividend is 1.72%, with a payout ratio of an incredibly conservative 6%.

    AAPL Chart

    AAPL data by YCharts

    Profile & Recent News: Apple Inc. is the iconic face of technical innovation - starting with personal computing with the Mac and broadening out into personal electronics with the iPod, iPhone and iPad. Apple has carve out a unique market segment, with fanatical customers willing to spend more for its products than competitor's products. Apple enjoys a profit margin of about 45% on iPad's and the company has a howling flood for free cash flow.

    The company is ridiculously valued by many measures, the 13.20 PE Ratio the most obvious. Yet there are concerns. While sales in 2012 are setting records, the company has a short product cycle. Company revenues are tied to its ability to continually evolve new products and upgrade/redesign new models on an annual basis. This was taken for granted when the company's founder and innovation Godfather oversaw the R&D pipeline. However now that he has sadly passed away questions remain if the company can continue his legacy.

    Looking at the price and return on equity numbers from the accompanying chart, it appears the price had gotten ahead of itself a bit in 2012. However the recent correction has returned Apple closer to its more recent growth line. I panned Apple earlier this year, believing that a price north of $700 a share was unsustainable and in fact it has come down over 20% since those heady days of September. Now though, I think the company's shares are well priced and offer an excellent opportunity for 2013.

    Google Inc.

    Financials: Google's recent closing price was $681.72, within a 52-week trading range of $556.52 - $774.38. The company currently trades at a Price to Earnings ratio of 21.36 with earnings per share of $31.91. Google has a current ratio of 3.94. It has a profit margin of 22.20% and an operating margin of 28.06%. It pays no dividends.

    GOOG Chart

    GOOG data by YCharts

    Profile & Recent News: Google is the web leading search platform. The company boasts of a fortress-like balance sheet, with a debt/equity ratio of only 0.11 and current ratio of almost 4. Its return on equity has plummeted to a "mere" 17% as more and more people are using mobile devices to search the Internet. However the company recently announced a major campaign to grow into the mobile market.

    Google has purchased more than 100 companies in 14 years and I expect management's solution will involve using its cash horde to purchase an answer.

    Overall the future of computing, whether mobile or desktop will impact how companies like Google will grow into the future. This will remain a concern until Google can provide more details into its mobile future. I addition, several key senior managers have left the company, their heads turned by competitors Yahoo (YHOO) and Apple.

    Intel Corporation

    Financials: Intel's recent closing price was $21.73, within a 52-week trading range of $21.22 -$29.27. The company currently trades at a Price to Earnings ratio of 9.48 with earnings per share of $2.29. Intel has a current ratio of 1.93. It has a profit margin of 22.13% and an operating margin of 29.92%. The Company declared a quarterly dividend of 22.5 cents per common share, payable on December 1st to shareholders of record as of November 7. The annual yield on the dividend is 4.1%, with a payout ratio of 37%.

    INTC Chart

    INTC data by YCharts

    Profile & Recent News: Intel designs, manufactures and sells computer components. The biggest driver to Intel's recent share price are reports that Apple is investigating a transition away from Intel's x86 chips to ARM-based processors in its OS X product line.

    Intel, whose processors run more than 80 percent of the world's computers, has struggled to achieve comparable success in the market for chips that run phones and tablets. The company is pushing a new line of thinner and lighter notebook computers -- called Ultrabooks -- to rekindle demand for its chips. Intel plan to invest as much as $4.1 billion in Dutch chip-equipment maker ASML Holding NV (ASML) in an effort to shave two years from the time to adopt new production techniques.

    While the price is tempting, I would still want to wait and see how things work out on its new initiatives before I committed to Intel.

    So, in conclusion I must admit I have a much different outlook now than I did in September. At that time I was cautioning that Apple at $700 was unworthy of a purchase, while even holding shares was chancy. However now that it has retreated to its historical valuation curve I think it is the buy for this group. In my mind the best stock to own in 2013 out of this group is Apple.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Nov 12 10:10 AM | Link | Comment!
  • Does Apple Have Worms?

    Apple (AAPL) is now the largest company in the world by market cap, with a share price $650 off a ludicrous PE of 15.3. The recent iPhone-5 launch sold 5 million units the first weekend. This Apple is big, red and juicy. Be careful before you bite. It may have worms.

    One year after CEO and iconic visionary Steve Jobs died I look at Apple and I hold three concerns. First, some background:

    When Jobs passed away, my biggest question was how would the company, corporate culture and future success be impacted by the loss? By all reports Jobs was a micromanaging perfectionist, always driving to make each new product a wow event. Looking at Apple on October 5, 2011, I trusted that there were a number of new products in the development pipeline. I assumed they would be awesome in the Jobs/Apple tradition. But where would things go as time went on and the touch of the masters hand faded?

    In 1985 Apple was riding a wave of popularity as products like the Macintosh and the Laserwriter had transformed computing. Jobs was forced out of the company board who wanted a manager to run the burgeoning empire. Jobs went out and became involved in a pair of companies called NeXT and Pixar.

    By 1996 Apple was on the cusp of bankruptcy as products lost the wow factor. The impression from many (myself included) was that Apple was making too many corporate decisions. Quality was down. Functionality, always a Jobs/Apple hallmark, was deteriorating. The software was becoming increasingly clunky. As the storm clouds grew the company reached out and bought out Job's NeXT to use the innovative operating system Jobs had overseen in development. They brought in Jobs as an "advisor" and his roll quickly became CEO for the second time.

    Jobs brought Apple back from the abyss, again impressing his demand for innovative excellence at every level. In 2012, shortly after his death, Apple price topped $700 a share.

    AAPL Chart

    AAPL data by YCharts

    One year after his death it closed at $652.59. Even as late as 2009 I could have picked up Apple for around $140. A host of naysayers were saying then it was overpriced. A new host are bashing Apple, however from a fundamental standpoint it looks dazzling. Earnings per share are a monstrous $42.54 for a PE of 15.3. Quite reasonable for a company that has been growing well above 20% per annum. It initiated a "small" dividend of $2.65 per quarter for a yield of 1.62%. The best thing I like is the more than $27 billion in cash it is sitting on. That is quite a war chest.

    But a year after the Master's death I have concerns:

    Apple TV

    I have been hearing about Apple TV/i-TV for two years. The story is it will be a product that will revolutionize the way we use home entertainment in the same way that Apple revolutionized personal computing (Mac/iPad) and personal electronics (iPod). It will be out by 1Q 2012, no wait, 2Q 2012, err, well now entering 4Q 2012 we know it will not come out at all this year because of contractual and integration problems with cable and television networks.

    In any case the longer the Apple TV stays out of stores the more I worry it will never arrive - or be a disappointment when it arrives. Why? Well looking at...

    IPhone5 Map Fiasco

    Some Apple products have been more flash than substance, but everything that came with it under Jobs was incredible useful. For example the original Mac was a wonder, even if it was pricey. Its biggest weakness was its lack of software options and applications. The applications it had was mostly quality.

    Then came the iPhone-5, critics and users gushing about it, except the mapping app which couldn't even map whole continents. It was egregious quality control, a corporate decision (replacing Google Apps) trumping user functionality. True, it was just one wretched item within a marvelous product. One worm can sneak into even the best managed orchards. The question is will there be more?

    China

    Apple's products are primarily made in Asia, specifically China, and that country is having its own problems. Economic doldrums and growing dissatisfaction with elite corruption has lead to a remarkable series of strikes and protests over 2012. Foxconn, the Taiwanese electronics producer that makes a lot of Apple product has been hit by several strikes and closures over pay and working conditions.

    Meanwhile the Chinese government seems to have been tacitly condoning often times violent protests against Japanese firms. How much has this been to support China's diplomatic actions and how much to refocus worker discontent on an external problem is hard to tell. This seems to increase the danger of problems against foreign firms, whether American or Taiwanese. So far the main parties say that problems in China have not impacted Apple supplies, however initial sales of iPhone-5s fell millions short of analyst expectations, primarily due to lack of inventory.

    The Bottom Line

    This does not mean that Apple is about to implode. It has a raft of technologically innovative products working under a remarkable operating system. It has a massive moat in that Apple customers are extremely loyal, even fanatical about the products. In fact I have no doubt that profits will rise, the dividend will advance, and with the incredibly important 4Q and holiday season upon us, Apple will gush out record sales and profits.

    The problem is what happens next? Apple's smartphones and related products make up 43% of the company's revenues for 2011 and I expect that ratio to increase slightly for 2012. It is a market in which Apple has to come out with a new product every year to keep the market place excited and sales up and moving. Every year a new astonishing iPhone needs to come out to keep Apple the juggernaut it has been. Will the inheritors of Steve Jobs keep the quality fruit coming, or will we start to see too many worm-ridden fruit?

    The Apple I see is big and luscious and ripe. There are a few worms. Will there be more?

    What do you think?

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: AAPL, Technology, long
    Oct 08 10:29 AM | Link | Comment!
  • Sycamore Networks Fire Off $10 Special Dividend!

    Sycamore Networks (SCNR) has declared a $10 special dividend payable to shareholders on record 1 October. With a price just around $15 that is a 67% yield just for the special dividend. Even with the dividend it will be in great cash position, while reporting sharp increases in revenue.

    This is a great first sign of what could be a record-setting special dividend season. As I stated in this article,a number of factors are liable to encourage corporate boards to reward investors by paying out some of the massive cash hoards they are sitting on.

    I'm buying Sycamore as we speak and hope to land some more special situation the next few months.

    Disclosure: I am long OTCQB:SCMR.

    Additional disclosure: I have purchased SCMR in the last 24 hours

    Sep 24 4:20 PM | Link | Comment!
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