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Apple iPad Sales Are Key: Fund Managers

BOSTON ( TheStreet) -- Apple's (AAPL - Get Report) quarterly earnings results, to be released today after the stock market closes, are being overshadowed by concern over CEO Steve Jobs' health. Fund managers say investors should instead focus on the growth of popular products including the iPad and iPhone.

After Steve Jobs announced another health-related leave of absence yesterday, Apple shares fell as much as 6.4% from an all-time high of $348.48.
Apple CEO Steve Jobs

The news was oddly timed, as the announcement came a day before Apple releases its fiscal first-quarter financial report when the stock market was closed to observe Martin Luther King Jr. Day. Even so, fund managers such as Channing Smith, who manages the Capital Advisors Growth Fund (CIAOX) from Tulsa, Okla., say investors need to cut through the noise.

"Looking at the circus -- and that's probably a good way to describe it -- the perception has been rightly or wrongly that Steve Jobs is Apple," Smith says. "This issue with the unexpected health development is going to create long-term uncertainty, but in the short term Apple's product lineup will remain best in class."

Herb Chen, manager of the Huntington Growth Fund (HGWIX) in Columbus, Ohio, expects Apple's shares to recoup their losses. "Earnings will beat expectations," he says. "Apple typically sets low earnings expectations, and hence, beats the Street."

For the company's first quarter of fiscal 2011, analysts expect Apple to report earnings of $5.40 a share and revenue of $24.4 billion, according to a poll by Thomson Reuters. That would be a sharp increase from a year earlier, when Apple posted a profit of $3.67 a share on sales of $15.7 billion.

But it isn't all about earnings and revenue numbers for Capital Advisors Growth Fund's Smith, as the sales performance of Apple's devices will tell the real story, he says. Capital Advisors Growth Fund has 3.1% of its $23.5 million in net assets allocated to Apple.

"We're expecting another enormous upside quarter when they report, especially with the iPad," Smith says. "What's key is that, in this critical holiday season quarter, Apple had two enormous distribution channels open up at Wal-Mart (WMT) and Target (TGT). I think the Street will likely have underestimated the growth in the iPad."
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