Apple Launches Developers Conference, High Yield Bonds Top Stocks, Says Analyst

NEW YORK (TheStreet) - While the Nasdaq is down roughly 1% and the S&P 500 has declined nearly 0.6% in Monday's trading session, the focus remains on Apple (AAPL) as the company kicks off its Worldwide Developers Conference

Shares of the tech giant are down around 1% on the day, but that didn't deter the CNBC "Fast Money Halftime" traders from sticking with the stock. Shares of Apple still have upside, said Pete Najarian, co-founder of optionmonster.com and trademonster.com, who added that the company continues to be "very shareholder friendly." 

To no surprise of Joseph Terranova, shares of Pandora (P) are headed lower as investors fret that Apple's new music service could hurt the company's business. Terranova, a senior managing partner at Virtus Investment Partners, added that too many Apple investors get disappointed by the WWDC results, when really it's about creating new software for future and current devices. 

Jim Lebenthal, CFO and CIO of Lebenthal & Company, is long Apple, but is becoming concerned that investors are too complacent. The stock is so widely owned, he's worried that there aren't many buyers to purchase more shares at this point. 

Lebenthal also said that Apple's management needs to be careful of losing sight when it comes to the iPhone. The iPhone franchise is the company's breadwinner and a dent in market share from Google (GOOGL) or Samsung could create big problems, he explained.

Apple's margins in its music business seem likely to decline, according to Stephen Weiss, founder and managing partner of Short Hills Capital Partners. However, the company will likely make a sacrifice to keep existing Apple customers on board with new products. 

Toni Sacconaghi, senior research analyst at Bernstein Research, said there's probably nothing too unexpected coming from Apple at the WWDC event. While software updates and new features are likely, a new hardware announcement is not. He also doesn't expect the company to roll out a physical TV any time soon, or ever for that matter. 

While the company may provide a refresh to its current Apple TV product, a physical TV doesn't have attractive margins and the competition is too intense, Sacconaghi explained. Plus, the company's product would need to differentiate itself, and it's unclear how that would be the case, he concluded. 

The conversation shifted to bonds, when Adam Parker, U.S. equity strategist and managing director at Morgan Stanley, said investors should consider high yield bonds. On a risk-adjusted basis, he said high yield U.S. bonds seem more attractive than U.S. equities, although he likes both asset groups going forward. 

Parker made the case that both assets could potentially outperform through the year 2020. He argued that analysts' estimates for stocks are still too low, while investor sentiment is also still too low. Parker also said the economy is likely to do better in the second half of 2015 than it did in the first half.

That's the wrong call, said Lebenthal. Although Parker says he sees both assets as attractive, Lebenthal thinks it's a mistake to like high yield bonds more than U.S. stocks. Equities still have upside, he said. 

High yield bonds are "fully valued," while U.S. equities are "fairly valued," added Weiss. He likes stocks over bonds, but also acknowledged that he's "a little cautious on the market" in the near-term, especially with retail sales on tap this week. 

Rather than buying high yield bonds, investors should consider owning financial stocks, Najarian said. The sector trades with a price-to-earnings multiple well below that of the S&P 500.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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