Apple: Tomorrow's Monster Stock Today

Stocks climbing to 10 times their original price are rare breeds. But they're not impossible to find -- especially when you have Fools for friends.

The market's best stocks include companies that have risen dozens of times in value by taking advantage of the market's weaknesses. These aren't penny stocks; they're viable companies with sound business prospects that are achieving phenomenal returns. Finding just one or two of these monstrously successful firms can help you establish a winning portfolio.

Stalking the monster
To find tomorrow's winners, we've enlisted the help of more than 180,000 monster-trackers at Motley Fool CAPS who have successfully picked stocks that have doubled, tripled, or even quadrupled in price. This week, All-Star member befoolednot gives us consumer electronics icon Apple (Nasdaq: AAPL  ) as his next monster pick. He made his mark with Whole Foods Market, which surged 405% after he picked it to outperform the S&P 500, which was up only 14% in the same time frame.

Of course, you shouldn't jump into the breach just because an All-Star stock-picker did. Just consider this as a starting point for your own research of extreme buying opportunities.

Apple Snapshot

Market Cap $621.7 billion
Revenues, TTM $148.8 million
1-Year Stock Return 78.2%
Return on Investment 38.3%
Dividend & Yield NA/NA
Recent Price $663.22
CAPS Rating (out of 5) ***

Source: FinViz.com.

A roll of the dice
The big news, of course, is Apple's $1.05 billion patent infringement award against rival Samsung, where a jury found that the South Korean handset maker infringed on six out of seven Apple patents but the iPhone maker didn't infringe on any of Samsung's patents. As the Fool's Evan Niu points out, the deliberations could have implications far beyond the court case: Fines could be trebled to more than $3 billion, a sales injunction on Samsung phones could be imposed right before the launch of the iPhone 5, and Microsoft's (Nasdaq: MSFT  ) Windows Phone could have just received a shot of adrenaline.

Did anyone else hear Nokia (NYSE: NOK  ) gulping down large drafts of life-giving air, having only just agreed to produce a Windows-based phone? Maybe even BlackBerry maker Research In Motion (Nasdaq: RIMM  ) was given a little mouth-to-mouth for the coming debut of its BB10 operating system, though there are months to go before it arrives.

This battle's not over because one jury said so, though. Samsung will appeal, and there are those who think it was a decision for a U.S. company made by an American jury. After all, this ruling came just after a South Korean court said Samsung didn't copy the iPhone's design, though it did rule they each violated some of the other's patents. This isn't over by a long shot.

Momma needs a new pair of shoes!
Maybe the second biggest news of last week, then, was that Apple became the biggest company in the world. Ever. The $630 billion market cap surpassed Microsoft's achievement back during the tech bubble of the late 1990s, yet Motley Fool analyst Austin Smith points out that it's even more incredible than that: The gap between Apple and No. 2 ExxonMobil is some $200 billion, meaning that 95% of the companies comprising the S&P 500 are smaller than the distance between the first- and second-place finishers.

To get to that point, however, Apple had to create products consumers wanted and desired, and that's not abating anytime soon. The iPhone 5 is expected to sell as many as 50 million units when it launches, making it perhaps the greatest consumer-electronics gadget debut ever. The smartphone may have saved Sprint Nextel (NYSE: S  ) from irrelevance, as it was able to bring more new customers on board and staunch customer churn. It was criticized for essentially giving away the store to Apple by guaranteeing $15 billion in iPhone sales, but the gamble appears to be paying off.

The iPad owns the tablet market, and as the Samsung court case revealed, it has sold almost 30 million iPads since its launch -- and that's just in the U.S. -- compared with 1.4 million Galaxy Tabs. With Apple TV on the way, the potential for padding its lead seems unstoppable.

Price is what you pay
For all that, Apple is still cheap. It trades at just 15 times earnings and 12 times estimates, but even better, Apple's enterprise value goes for just 13 times its free cash flow. Maybe that's not bargain-basement valuations, but for the ginormous company such as Apple is, it's pretty darn cheap nonetheless and indicates that any thoughts that it won't be able to sustain its growth, or that a stock priced north of $660 must tumble, are shortsighted.

CAPS member EVplusEV does like Apple's chances and expects the Samsung decision to give it a bit of a boost higher, but he says the iPhone 5 really needs to be a home run to sustain it. Even if the smartphone doesn't clear the high hurdles analysts have set for it, I think Apple will still outperform the broad indexes and have indicated so on CAPS, but tell me in the comments section below whether you would take a bite of Apple's stock at these levels.

A chance for scary growth
The Samsung saga is just one of the many catalysts for growth Apple has to its credit, and a new premium report from The Motley Fool details the rest. It also discusses the risks investors need to watch out for, so sign up now for the new Apple research service and get everything you need to know about the iPhone maker, complete with free quarterly updates. Access this premium research report.

Fool contributor Rich Duprey owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Whole Foods Market, creating a bull call spread position in Apple, and creating a synthetic covered call position in Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 27, 2012, at 9:29 PM, ibarrac wrote:

    Don't you mean Revenues TTM 148.8 Billion with a B, not million?

  • Report this Comment On August 27, 2012, at 10:37 PM, JokerJoey wrote:

    You forgot about the new dividend as a further attraction to the stock, and that's important because as the stock grows, so might the dividend.

  • Report this Comment On August 28, 2012, at 3:44 PM, pondee619 wrote:

    Rich:

    When was that snapshot of Apple taken? It is paying a dividend now. You knew that, right?

    ibarrac is closer to correct than you re rvenue.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1998000, ~/Articles/ArticleHandler.aspx, 12/18/2014 8:49:41 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement