Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Dear Rock: Paper Beats Apple, Too

In the past three months, Apple  (NASDAQ: AAPL  ) is down more than 20%, while International Paper  (NYSE: IP  ) is up more than 20%, creating almost a perfect-pairs trade. Even if you extend the picture out since the start of 2012, Apple's underpformance only widens; International Paper has returned more than 55%, while Apple is up less than 10%. 

The key idea here is that it could be surprising to many investors to see Apple, the leading mobile disruptor, underperforming an industry like paper. The Office was created with a paper sales office instead of one with hot-shot product designers for a reason. 

Yet in the following video, the Fool's Eric Bleeker says there are plenty of lessons to be drawn from Apple and International Paper. First, he notes that International Paper's earnings were off a good amount in 2012, while Apple sees investors fretting about growth after it turned in 27% earnings growth. That's an illustration that in the short run, companies are driven by perception more than by anything else. Apple is declining right now because investors are paying an increasingly smaller P/E for the company. Likewise for International Paper: Investors are taking a brighter view of the future and paying a higher P/E in spite of last year's earnings decline. 

Why are investors excited about International Paper? Because of its focus on corrugated paper, which presents emerging-market opportunities and management's focus on returning capital to shareholders. 

What are the two areas investors are focusing most on with Apple right now? The ability to capture emerging-market growth, and what it'll do with all its cash. Eric says that while most Apple investors aren't seeking out the next great opportunity in paper, there's a lot to be learned from International Paper. Most of all, if Apple can make the right moves in the next year on those two areas, how quickly could its share price rebound?

To see Eric's full thoughts, watch the video.

After its recent sell-off, is there reason to sell Apple, or is this an opportunity to be greedy and buy more when others are fearful? The Motley Fool's new research report on the company gives you the right information so you can make a decision whether Apple has a place in your portfolio. Best of all, it comes with continuing updates and exclusive reports. To get started, just click here now.

Read/Post Comments (1) | 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 March 16, 2013, at 12:47 PM, MajorBob04 wrote:

    Thanks for the writeup & video. Our professor just asked our MBA team to study International Paper this week! Meanwhile I have been invested in Apple for several years so the comparison is compelling. The paper industry has been struggling as the digital world (e.g. Apple, iTunes) continues to grow and the print world (e.g. newspapers, magazines - International Paper's customer) continues to shrink. But if IP can sell new products & find new growth markets while managing their business effectively, their stock price will continue to do well.

Add your comment.

Compare Brokers

Fool Disclosure

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: 2316720, ~/Articles/ArticleHandler.aspx, 9/25/2016 8:26:33 AM

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...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
AAPL $112.71 Down -1.91 -1.67%
Apple CAPS Rating: ****
IP $48.41 Up +0.50 +1.04%
International Pape… CAPS Rating: ****