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Richard Tarjeft
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entrepreneur, investor, future hedge fund manager.
  • Trading Microsoft And Apple 0 comments
    Apr 9, 2013 12:30 PM | about stocks: MSFT, AAPL

    I decided to compare two tech giants for possible trade indicators. For my analysis I used Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL). The reason I picked Microsoft is because I believe it is foretelling of the plausible future of Apple.

    Microsoft :

    The stock has been flat for the last decade after a spike to $58 per share before the 2000 tech bubble burst. It has maintained a channel between $20 and $37 per share. The most recent opportunity to buy at or slightly under $20 came in the 2008 financial melt down. The stock has consistently paid out dividends over the last 10 years. They have paid out almost $10 billion dollars a year in dividends to the share holders. They maintain a 15.66 price-to-earnings ratio currently.

    Apple :

    The stock has been a darling of wall street for the last 5 years. The stock has sky-rocketed 400% in that time frame and was an even bigger winner for holders who owned since before 2005 when Apple executed a stock split. The company had never paid any other dividend until the middle of last year when it paid out about $3 billion dollars. It has since done the same twice totaling almost $8 billion. Over the last 6 months the stock has lost almost 40% from it's peak and is trading at a very low 9.64 price-to-earnings ratio.

    The Trades:

    I'm not particularly crazy about current P/E of 15.66 I think that a company of Microsoft status will continue to earn relatively the same amount of money going forward. It's not making serious inroads to new revenue streams and places where it is gaining ground are not outpacing it's core software business. That said this company is going no where. I love the stock for a channel trade.. Buy at $24, sell at $29, and re-enter buy order. If you can execute 4 of these a year, and that's all you did, it would out-perform most portfolio returns.

    Apple is another story. I think the stock based on current revenue is way over sold. That said I don't think it's out of the realm of possibility it gets sold under $400 per share while institutions and news items effect the price. I really like the low price-to-earnings ratio. The long term question is can Apple maintain the revenue and profitability? I think the answer is a definite yes. On top of the companies growth you have the good possibility to collect more dividends although I think splitting the stock again 3-to-1 would be a more prudent move on the part of the board. It would make the stock more affordable and less prone to the wild swings it has been experiencing. I'd be a buyer of sub $400 and accumulate more on any further pressure.

    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.

    Stocks: MSFT, AAPL
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