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Apple's Tremendous Upside Compared To Google

|About: Apple Inc. (AAPL), Includes: AAPL, GOOG

When I think about the stocks of companies that dominate their fields, I immediately think of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG). They are similar in price, (currently $30 difference in share price) and Apple leads in the realm of tech devices, while Google boasts huge market share of search advertizing. Both stocks have had significant gains in 2012, and I wish to show you which of these stocks are the better investment for the long term.

What does Apple have going for it? You just have to look at Apple's recently reported quarter. To start with, they have a huge pile of cash on hand. Apple has net assets reported at $116 Billion. Even with the newly instituted dividend and stock repurchase program, there will still be plenty of cash flow and cash to invest in the business or strategic organization. If the board of Apple decides to hang on to a majority of this cash remaining, it does not hurt to support the value fo the company (currently $556 Billion).

They also are going to begin selling the 3rd generation of iPad. Initial demand for this new product seems to be strong considering they sold out of pre-order supply relatively quick. They also recently reported that they had a record sales. This new iPad reportedly has a better resolution screen, as well as LTE capability. This tablet, combined with the reduction in price of the iPad 2 should support growth and create additional revenue.

The iPhone sales have been strong and picking up steam in emerging markets. This next quarter should reflect sales growth in China, seeing that it is one of the largest markets for smart phones.

Quietly, Mac computer sales have continued to grow. This fact seems to be overshadowed by the popularity of the iPhone, iPad and the growth potential of those products. It seems that increasing numbers of consumers are discovering the superior quality of Apple's computers and laptops.

Apple still has a few drawbacks shadowing their future. It is yet to be seen whether the absence of Steve Jobs at the helm will impact innovation in this company. Genius like this is impossible to replace, and it will be interesting to see how their executive team will respond to the hole that is left in his absence.

The stock has recently had a huge run, and does not seem to take a break. It seems like the stock was around $510 since it had a breather and there is concern that an increase in value that quickly is impossible to sustain.

Google, on the other hand, continues to dominate the search advertising market. Google has become a verb when it comes to searching the internet. Because of this trend, this company continues to grow their profits by having paid advertizing on their search pages and offering individuals to offer ads on their web pages. Google continues to do this better than any other company, which should help them to continue growing. That is why they had 66.4% market share according to Search Engine Watch. With the newest enhancement of their search engine, they will continue to hold market share in this area.

The economy is improving which will benefit Google. As companies' profits increase, so will their advertising budget. The biggest beneficiary of increased advertising is the company with the biggest share of the business. This continues to be Google.

Google's biggest concern is their prospect of growth. Can they continue to grow at the rate that is expected of them, especially with so much competition emerging? Is there really that much upside in the online advertising business?

Apple seems to have the biggest upside to their business. They have strong growth not only in one product, but three (mobile phones, tablets, and computers). They are trading at an all-time high, while Google has to move over $120 per share to reach their high of $747. Since Apple also is trading at a P/E ratio of 11 on forward earnings estimates compared to Google's ratio of 14 on forward earnings estimates, Apple seems to be the better buy, even at these high levels.

Disclosure: I am long AAPL.