This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Don't Hate the Company With a P/E Ratio of 300

Stocks in this article: AMZN AAPL

NEW YORK ( TheStreet) -- It bugs the living heck out of Apple (AAPL - Get Report) diehards. How can AAPL trade at a P/E ratio of 16, while we're-not-sure-we'll-be-profitable-next-quarter Amazon.com (AMZN - Get Report) commands a ratio of 300?

This goes against every single thing your granddad taught you about investing. For goodness sake, in a world this absurd, AAPL should cost, like, $13,000 per share.

At first blush, it is strangely peculiar. Using old-school applications of the P/E ratio, Wall Street undervalues the world's top-performing company by a mile, while overvaluing a company with razor-thin margins and an appetite for spending. That goes against everything that makes sense. Or does it?

In the spirit of Michelle Obama kicking Clint Eastwood's ass, please follow a political analogy to help explain this seemingly inane AMZN-P/E conundrum.

Even though he was killed before I was born, I am a big Robert F. Kennedy fan. Liberal politics died in America when Sirhan Sirhan gunned RFK down on Wilshire Boulevard in Los Angeles. Heck, we might not have had to endure Richard Nixon if RFK had become president.

In any event, many Obama-hating Republicans were big-time Kennedy Democrats in the 1960s. If you're around my age, 37, ask your parents who they voted for in 1960 and who they wanted to vote for in 1968. If you're around the age of my parents, 60 or 70, what say you? I bet you respond with a pair of brothers.

Losing JFK in 1963 hurt. The assassination of Malcolm X raised eyebrows in 1965. But the murders during a three-month span in 1968 of Martin Luther King, Jr. and Bobby Kennedy sapped any shred of political activism and awareness out of liberal Democrats.

Somewhere along the way these people -- folks like my parents -- became raging conservatives. The barren economy of much of the 1970s compounded the shock of the aforementioned deaths, quite possibly sending baby boomers into this downward political spiral. Conservatives like Rush Limbaugh and Rupert Murdoch came along and made it stick.

I don't buy the old adage that "a young conservative has no heart, and an old liberal has no brain." I subscribe to the theory Thomas Frank put forth in his 2004 book What's the Matter With Kansas?. These old Democrats act in opposition to what's good for their own and their country's economic interests when they vote along conservative and supposedly traditional lines.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs