NEW YORK (TheStreet) -- From the iPhone to the iPad, Apple (AAPL) - Get Report, with its revolutionary smart phones and handheld devices, has been hailed as one of the greatest technological innovators of the 21st century.
So why does James Dailey, senior portfolio manager of Harrisburg, Pa,-based Team Asset Strategy Fund, choose to invest in Espoo, Finland-based
instead? Because Dailey is certain that Apple's future is not as foolproof as the conventional wisdom would suggest -- and he made the case to
during a recent visit to New York.
TheStreet: So we know you're bullish on Nokia. Would you consider investing in Apple too?
Dailey: There's an old saying, that there's two types of businesses: those with problems and those that will have problems. I think Nokia and Apple are that dichotomy. Nokia has a lot of problems right now, and the stock reflects that. Apple -- everyone loves it. There's no question that their products are awesome. The adoption rate is wonderful. But the question is, where does it go from here? What happens with Steve Jobs' health? What happens with the next product cycle? To think that Apple will forever be the leading gadget provider is nonsensical. It defies the history of the earth and how societies, markets and businesses evolve.
Apple might continue to perform wonderfully. But eventually they're going to stumble. And when they stumble, it will be ugly -- like losing-70%-of-their-value type of ugly. If they miss a product cycle, they're in deep trouble.
The Justice Department's getting involved now. There's percolating problems at the company, and eventually sentiment will shift. Every growth manager has an Apple right now or is forced into it to try to keep up with their index. There's a time when the door will get too tight and no one will be able get out.
was a wonderful business in 2000. But the stock hasn't done anything for ten years. Why? Because it was mispriced in 2000. It was too expensive, given its corporate profile. We think Apple's somewhat in that same situation, but worse -- while Wal-Mart has a moat around its business, there are literally dozens of companies trying to take what Apple has, and one of them is going to win. And my guess is it's not going to be Apple.
TheStreet: Could the winner be Motorola (MOT) ?
Dailey: Look at where Apple was seven years ago, before the iPod. Apple
Motorola before Steve Jobs came back. They were horrible. That stock was a piece of garbage for the entire tech boom in the late nineties. People hated it because of that.
on the other hand, was everything.
Technology is a very fickle business, and that's why Warren Buffet's never invested in it. He says he can't see ten years from now what role Apple is going to have in our society. Right now, it looks like they're going to be the dominant player, but that can easily change. And it usually doesn't take that long to happen.
TheStreet: What about Nokia? Can it get any worse?
Dailey: It can get worse; it's almost priced as if it it's going to get worse now. It yields 4.5%, which, for a tech stock, is insane. That makes it one of the cheapest tech stocks out there. The disappointing earnings projections -- well -- again those things tend to be cyclical -- and if Nokia comes up with a good product ...
The other thing is they have an anchor in the emerging markets, and Apple doesn't. Will Apple get that? You know what? The average person in India, Vietnam or Africa can't afford a $500 phone and an $80-a-month phone bill. And the carriers there can't afford to subsidize it. Nor do they have the infrastructure for that amount of data demand.
Nokia's performance in the lower-priced segment was actually really good. But people are only focused about Western Europe, and in particular the U.S. right now, where Nokia absolutely stinks.
Will they stink forever in the U.S.? They might, I don't know -- but at least they've got the growth over here that can provide them with the resources and the time to maybe not stink as bad. And that's all they have to do for the stock to go up a lot. It's to not stink as bad. You have that margin of safety. The hurdle rate to make money in this investment is not that high. Whereas Apple right now, they have to keep hitting home runs for that stock to keep growing. And they certainly might do that. But if they don't, there could be big losses.
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There is a legitimate issue about Steve Jobs. Certainly we don't wish ill will on the man, but the guy had pancreatic cancer -- one of the worst cancers anyone could have, and the company is linked to him. I can't even name the CEO of Nokia, and I'm invested in the company. The CEO of Nokia is not all that important. It's the engineers of Nokia who are trying to come up with the new products.
Jobs is that unique person -- he's the proprietor, entrepreneur, engineer and marketer. He's one of those weird, unbelievably talented people -- and if he goes, for whatever reason -- and eventually he will; we all go some time -- it'll be a major problem. It's very morbid; but again as an investor, I think you've got to think about these things.
I can tell you right now there's probably only one person that, if they died, the stock might react as abruptly, too, and that would be
If Steve Jobs dies, Apple will get absolutely impaled. My guess is Berkshire Hathaway probably will get hit, but maybe not as hard. Steve Jobs is bigger to Apple than Buffet is to Berkshire Hathaway.
Apple Conference 2010: New iPhone Unveiled
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-- Reported by Andrea Tse in New York
>>Apple Conference 2010: New iPhone Unveiled
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