Too many investors get excited and jump into a stock without comparing and contrasting against other possibilities. This is true for great stocks, and it's true for terrible stocks. What I'm about to do is play devil's advocate. Again.
In this series, I try to help investors see the possibilities by highlighting a few companies as reference points before making the jump into a stock.
Today's stock is Apple
Previously known as a niche computer provider, then the premier MP3-player maker, Apple is now the "it" telecom company with its iPhone.
Frontier is at the opposite end of the spectrum. It provides telecom services to rural areas where competition is minimized and government subsidies are available. As folks go mobile, it's a dying business, but Frontier rewards shareholders with a 9.7% dividend yield.
There is some sizzle in Frontier, though. The 9.7% yield is after it cut its dividend by 25% to fund an acquisition. It recently bought out some poorly performing rural properties from Verizon
Speaking of growth (and Apple fans love growth), this provider of Dragon NaturallySpeaking dictation software grew sales at 39% per year over the past five years. Nuance still has negative earnings (though positive free cash flow, partially thanks to its generous employee stock compensation), but if you believe in the future of voice-recognition applications, Nuance is the biggest player.
JDS Uniphase is a one-time tech-bubble darling that provides components for optical networks, and test and measurement equipment for telecoms. It counts just about every big dog in the space among its customers -- Verizon, AT&T, Cisco, Comcast, etc. JDS has a rock-solid balance sheet flush with more cash than debt. The problem? It hasn't turned a profit since 1996.
While we're at it, Level 3 beats JDS by two years; it was profitable back in 1998. It provides fiber-based communications services. It shares JDS' profitability woes, but has a dangerous balance sheet to boot. However, that warning sign is offset by valuable long-haul fiber, which could be a huge asset as Internet data usage explodes and users demand faster speeds for streaming media.
Remember when IBM defeated Apple? Its PCs and the PC clones dominated the computer market and relegated Apple to the niche status I mentioned earlier.
Apple evolved. But so did IBM. More than half of IBM's sales now come from its consulting practice.
Now it's trading at a price that has legendary investor Bill Miller calling IBM "the most remarkably mispriced name in the market."
The final reminder
As you decide between Apple and these other alternatives (or none of the above), remember that I mention each of these companies not as recommendations, nor as a criticism of Apple. Instead, it's always a good idea to analyze many semi-related companies before making a buy decision. Good luck!
For more stock ideas, check out what could be the best opportunity in a decade.
Anand Chokkavelu owns shares of Microsoft. Microsoft is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor pick. Nuance Communications is a Motley Fool Hidden Gems selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google. The Fool has a disclosure policy.