This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple, Little Understood, Is Best-Run Company

Apple is hardly undiscovered yet not fully understood. Arguably the best-run company today, Apple has five segments in computing, consumer electronics, phones, software and retailing. Despite having excellent growth prospects, the company sells for a P/E multiple of 18, a cash flow multiple of 10, has $40 billion in cash and equivalents and no debt. Our view is that the recently announced iPad will sell well and that the next generation of phones will be a big boost to earnings.

Teva is just as dominant in generic pharmaceuticals and, given the dollar value of branded pharmaceuticals that are expected to lose patent protection, the company's growth prospects look as healthy as ever. The vertically integrated generic manufacturer will benefit irrespective of any health-care reform as it provides the lowest-cost alternatives to branded companies. The $50 billion company is expected to grow earnings 17% yet sells for 14 times 2010 estimated earnings.

What is your top "sleeper" stock pick?

Maronak: Given the underperformance against solid earnings, strong financials and attractive growth prospects, Activision (ATVI - Get Report) is a sleeper pick worth considering. We believe the company's attractive results have been overshadowed by general concerns of a slowdown in consumer spending in this gaming category as evidenced by Electronic Arts (ERTS) and GameStop (GME - Get Report). Activision, however, has a better title lineup, robust recurring monthly revenue from World of Warcraft and has just announced a stock-repurchase program.

What is your favorite sector?

Maronak: A favorite is always difficult for us to choose as we emphasize company fundamentals and see attractive opportunities in most sectors. That said, health-care represents a particularly interesting combination of growth and compelling valuation. Companies like Celgene (CELG - Get Report) and Teva Pharmaceuticals sell for less than 1 times their EPS growth rates of 24% and 17%, respectively. The lack of relative underperformance in 2009 was attributable to regulatory uncertainty and investor preference for investing in the worst-performing sectors. As fear from health-care reform initiatives subside and investors look for opportunities in sectors that have trailed in performance, health-care companies stand to attract renewed investor attention and funds.

Which sector or stock would you avoid?

Maronak: As much as we dislike generalizations, it's hard to ignore the challenges of telecommunications services. In many ways, the success Apple has enjoyed has come at the expense of AT&T (T - Get Report). Over the past three years, network traffic on AT&T's network has increased 50-fold yet revenue has increased only eight times. Worse yet, the most lucrative segment of revenue for carriers, text-messaging services, are being replaced by the least profitable, bandwidth-hogging data streams. Three percent of Apple iPhone users represent 40% of AT&T's traffic. With smart phones growing at 30% per year and application downloads in the billions, the problems will only become more acute, forcing carriers to spend billions upon billions on capital expenditures.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $112.75 -0.15%
ATVI $29.68 6.30%
CELG $123.97 0.76%
GME $42.25 -8.50%
T $33.18 -0.76%

Markets

Chart of I:DJI
DOW 16,588.96 -65.81 -0.40%
S&P 500 1,985.34 -2.32 -0.12%
NASDAQ 4,819.9880 +7.28 0.15%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs