2 Things to Look for in Apple's Earnings -- and 1 Not to

Some tech shares may be in a bubble, but Apple isn't one of them.

Apr 22, 2014 at 7:12PM

With today's close, U.S. stocks recorded their sixth consecutive winning day, as the benchmark S&P 500 rose 0.4%, putting it just six-tenths of a percent below its early April all-time high. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) also gained 0.4%, while the technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) was up 1%. The latter has notched up a six-day winning streak of its own since it bottomed just below 4,000 on April 11, for an aggregate gain of 4%.

That streak may have put an end to what looked like the early stage of a correction in technology shares -- or perhaps it has simply postponed it. In a letter to his investors on Tuesday, value-focused money manager David Einhorn warned that: "Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it." Mr. Einhorn has been closely followed ever since he presented Lehman Brothers as candidate for a "short" position well before the broker declared bankruptcy.

I tend to agree with him, although I think the term "bubble" may overstate what we are now witnessing. The breadth and magnitude of overvaluations at the height of the late '90s technology bubble was far greater than the current phenomenon, at any rate. Furthermore, "a clear consensus" that a bubble is under way is self-contradictory -- if the existence of a bubble were widely acknowledged by investors, that would presumably be sufficient to take the air out of the bubble immediately. Perhaps Mr. Einhorn meant that such a consensus exists among his direct peers (i.e., mainly savvy, value-conscious investors).


Sure enough, Einhorn goes on to write that, "The current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm." One very large capitalization tech stock that is not participating in the bubble -- rather the opposite, in fact -- is Apple (NASDAQ:AAPL), a stock from which David Einhorn has made a nice return during the past several years, incidentally. The maker of the iPhone reports its fiscal second-quarter results tomorrow; here are two things to look out for, and one not to:

  • First, don't expect a new product announcement. Yes, CEO Tim Cook has said that Apple will announce a new product category this year; however, Apple watchers don't expect any announcement before the company's World Wide Developer Conference (WWDC), which takes place in San Francisco on Jun. 2-6. Investors are extremely impatient for this, but they ought to take heart – WWDC is coming up quickly and, given the enormous media exposure it attracts, it's a logical showcase for a new product.
  • China iPhone sales. Apple and China Mobile, China's largest mobile phone operator, signed their landmark distribution agreement at the end of last year, and iPhones went on sale at China Mobile locations in mid-January. As such, Apple has nearly a full calendar quarter of sales data to look at. The agreement creates a long growth runway for Apple in a massive market – it will be interesting to see the initial results.
  • Capital return program. At the end of February, CEO Tim Cook promised an update on the firm's $100 billion share repurchase and dividend program "within the next 60 days." Despite having returned more than half of that $100 billion target since the program was first announced a year ago tomorrow (it's meant to be completed by the end of calendar 2015), Apple continues to accumulate cash faster than it can dole it out or invest it. As such, there are good odds Apple will increase the program tomorrow, particularly if it doesn't announce a new product.

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Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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