Apple in China
Concern Yourself Least When Others Fear Most
Stock Market Video
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Two finance-related headlines caught my eye this week.
The first was from the New York Times: "Searching for the Wives of Wall Street." The article details a potential new reality show called "Wall $treet Wives" about the women behind the men who work in high-powered finance jobs.
Apparently the many versions of the "Real Housewives" reality shows aren't enough for viewers, so now TV executives are creating more pseudo-celebrities, this time connected with Wall Street.
The producers are looking for women who lead "fabulous lives" in the New York area and are ready to let the TV cameras film their every move. The people behind the show insist they aren't merely looking for trophy wives and that some of the women may even have MBAs themselves! (Somehow I doubt this will matter, as most of these shows seem to be more focused on high drama than what the participants learned in business school.)
I doubt you'll gain any helpful stock investing tips by watching the show and it's unlikely to affect the market's movements, but if you catch an episode of "Wall $treet Wives," let me know what you think.
The second headline that caught my attention was from the Associated Press: "Entire Apple Stores Being Faked in China."
China has long been infamous for its fake designer handbags, clothing and gadgets, but this is a new one: Whole Apple stores are being faked, from the employee T-shirts and nametags to the product advertisements lining the walls.
However, a blogger living in China realized a store, located in the southern Yunnan province town of Kunming, was a fake when she saw the words "Apple Store" printed next to the logo. A real Apple store would never do that (they just use the ubiquitous fruit symbol printed on the stores' glass windows).
A reporter from the AP checked into three store locations visited by the blogger and found they are not listed on Apple's website of authorized retailers, confirming that the stores are fakes.
The Chinese government has long tried to crack down on the myriad faux products produced in China, and the fake Apple stores simply serve to highlight the enormous work they have to do in a country where pirated products abound.
Regardless of the fake stores, Apple is benefiting from the huge growth in China's economy. Just this week, Apple said that China was an important component of its record revenue and earnings in the quarter ended in June.
Apple's revenue soared to $3.8 billion in the third quarter, up more than six times from the year earlier period, in the area that includes China, Hong Kong and Taiwan. Apple believes that this is just the tip of the iceberg and is tapping into this market's huge potential with two new stores this year in greater China, one in Shanghai and one in Hong Kong.
Here are some other highlights from Apple's recent fiscal report card for Q3:
* The company earned $7.79 per share, a 122% jump year-over-year.
* Apple's sales climbed 82% to $28.57 billion.
* iPhone sales leapt 142%, with 20.34 million units sold
* iPad sales soared 183%, with 9.25 million units sold.
And Cabot Benjamin Graham Value Letter Editor J. Royden Ward thinks Apple (AAPL) is a good value stock to have in your portfolio. Here's what he had to say about it in February of this year:
Is it Undervalued? We expect Apple's earnings to grow at a rapid 24% pace during the next five years. At 14.7 times our one-year forward EPS estimate, shares are clearly undervalued. Exciting new products portend continued rapid growth in future years. Shares will likely advance to our Minimum Sell Price within the next two to three years. AAPL is low risk.
Company Profile: Apple develops, manufactures and markets personal computers and consumer electronic products. The company's revolutionary iPod digital music player, iTunes online music store and iPhone helped sales increase 33% per year during the past five years, while earnings per share surged 70% per year during the same period. Apple has a unique ability to identify what customers want, produce easy-to-use products and launch huge marketing campaigns to create demand.
Outlook: Apple's iPad tablet-computer helped sales soar 70% and EPS catapult 75% in the quarter ended 12/31/10--well above our estimates. In addition to gaining market share in the computer, smart phone and tablet sectors, new product launches, such as the iPhone 4, will keep Apple ahead of the competition. Steve Jobs, CEO of Apple, is taking a leave of absence because of health problems. Mr. Jobs will be missed, but the company's strong management team and innovative spirit will continue to thrive.
Roy currently holds AAPL in his Wise Owl Model and recommends buying it under his Maximum Buy Price of 354.54. To learn more and get his Minimum Sell Price for AAPL (and other highly rated value stocks), click here.
Now for this week's Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
Concern Yourself Least When Others Fear Most
This is classic, and so very valuable, for two reasons. The first is that danger is least and bargains are most plentiful when the crowd is most fearful. The second is that you won't recognize those bargains unless you've made an effort to resist the concerns of the psychologically unified crowd.
It also reminds us there's no need to worry about what everyone else is worried about ... whether it's unemployment or interest rates or terrorism ... or the debt ceiling.
In this week's Stock Market Video, Cabot Market Letter Editor Mike Cintolo says that sometimes the market is in a clear uptrend, sometimes it's in a clear downtrend and yet other times, it's kind of in the middle, like right now. Since mid-February, the market has been chopping around in a trading range. There are signs that the bulls aren't quite in control, so we urge you to be cautious, especially going during earnings season. However, we're still leaning bullish. Stocks discussed: Wynn Resorts (WYNN), VMware (VMW), Intuitive Surgical (ISRG), Rosetta Resources (ROSE), Halliburton (HAL), Polypore International (PPO) and Vertex Pharmaceuticals (VRTX). Click below to watch!
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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 7/18/11 - A U.S. Oil Stock Outhustling the Majors
On Monday, Cabot Global Energy Investor Editor Brendan Coffey discussed some predictions he made about oil and gas prices last December and where he sees things going in the second half of 2011. Brendan discussed the huge potential oil reserves in the Bakken area of the U.S. Mid-West. He also recommended a smaller oil company operating in that area that's outproducing the competition. Featured stock: Brigham Exploration (BEXP).
Cabot Wealth Advisory 7/19/11 - A Three-in-One Stock
On Tuesday, Dick Davis Digest Editor Chloe Lutts discussed the U.S. Postal Service's universal service obligation, its monopoly on the mail and how this affects rural customers. Chloe also discussed a stock that has solid fundamentals, a strong chart and a nice dividend. Featured stocks: Darden Restaurants (DRI).
Cabot Wealth Advisory 7/21/11 - Construction Obstruction
On Tuesday, Cabot Benjamin Graham Value Letter Editor J. Royden Ward discussed the booming construction business in rapidly growing areas of the U.S., such as where he lives in Florida, and how companies like Caterpillar are benefiting from this. Roy reviewed fundamental stock analysis and the PEG ratio, which he uses to select stocks. Roy then recommended two high-quality companies with low PEG ratios. Featured stocks: Caterpillar (CAT) and Cummins (CMI).
Until next time,
Editor of Cabot Wealth Advisory
P.S. There's a link to a short survey at the bottom of each and every Cabot Wealth Advisory and I invite you to take it! We really appreciate hearing form subscribers because it helps us better serve you (and sometimes even create new newsletters, like Cabot Options Trader, based on your interests). Make sure we hear your voice and take the survey now.