I am sure by now you are tired of reading and hearing and otherwise discussing Apple (AAPL). Tough luck. You need to read some more.
Apple said this week it will pay a dividend – a yield a bit below 2% – and will begin buying back stock. This has boosted the stock price a few percentage points – and, more importantly, made the stock eligible to be bought by value and income funds that can only buy stocks with dividends. A new buying universe for Apple shares opened this Monday.
You know all this. The crowd knows this. Is there something different about Apple from other tech stocks loaded with cash that now pay dividends — companies like Cisco Systems (CSCO) and Microsoft (MSFT)? You bet. Cisco and Microsoft are, to my mind, lousy, slow-growth monopolies that generate cash and grow in the modest single digits. Apple is an innovator with small market shares in markets its brand dominates and the ability to grow more than 30% a year for at least three more years. There is no comparison.
Last week I wrote about two crowds – the income crowd in the market and the growth crowd and how great stock pickers – or people who can read – can find companies that do both. Apple can.
Apple has less than 5% of the worldwide cell phone market. Put small laptops, netbooks and tablets together and it has less than 10% of that market. It has less than 20% of the worldwide laptop market, less than 5% of the worldwide personal computer market. This is the world’s most valuable brand and the world’s largest company as measured by market cap and it has tiny market shares in it’s target market – and the best products. There is no parallel in the last 100 years.
I try to avoid writing about individual names but it is hard to avoid Apple. When I give seminars I get the same question over and over again: “It is so expensive; can it go up?” The last time I heard that, the stock was at $395. It is now above $600.
What Apple shares are really worth
So I am putting myself out there: The stock, based on the valuation of the S&P 500, is worth $800+ and, based on the proposed valuation of Facebook, which has similar projected growth rates after 2012, is worth $1,200 a share.
I use a MAC. I am typing this on a Bluetooth keyboard that is feeding my iPad. I checked on the market while checking on Arizona real estate— still a train wreck, disregard the recent piece on the Wall Street Journal that there is a rebound – and my stuff is backed up on the iCloud. I watched The Voice on NBC last night and downloaded, on iTunes, a great duo singing Pat Benatar’s “We Belong” and kept in touch with the markets today with my iPhone while visiting the Grand Canyon.
The next horizon for investors
OK, enough Apple. Where else do growth and income come together?
Frack, baby, frack. Yup, fracking – the breaking up of subsurface infrastructures to yield gas and oil – is the next, best horizon for investors looking for income and growth. The obvious companies are known – but, as always, the crowd on Wall Street is missing obvious winners to those looking for growth and income. It is not just the outfits supplying chemicals for fracking or moving gas through ever-valuable pipelines. Think Midwest, think companies that can clean lousy oil or use the hydrocarbon leftovers that come down that pipeline with fracked oil and gas.
Apple is great – growth and income. So are companies benefiting from fracking with 9% dividends, also growth and income. More on that next week.