Welcome back to week 21 of the Big Idea Portfolio. Apple
|S&P 500 SPDR||$127.15**||$132.10||3.89%|
Source: Yahoo! Finance.
*Tracking began at market close on Jan. 6, 2012.
**Adjusted for dividends and other returns of capital.
Apple rallied on positive research reports and an irresistibly cheap valuation. A surprisingly poor earnings report from Dell
Let's talk price first. Foolish colleague Evan Niu ran the numbers last week and found the Mac maker gave back $107 billion in market value after rising to $644 a share in the wake of a blowout fiscal second-quarter earnings report. Bears simply outnumbered bulls, with skeptics preying on fears that iPhone momentum wouldn't continue.
But even if they're right, at 13.7 times earnings, Apple trades for a substantial discount to the broader S&P 500 and its CAPE-adjusted 21.2 P/E ratio. Even without adjustments, Apple stands below the 14.1 P/E the S&P 500 sports. Not exactly fair when you consider that, according to multiple researchers, the Mac maker accounts for about one third of the index's year-over-year growth.
Some analysts see this trend continuing. In a research report issued last week, Piper Jaffray's Gene Munster disputed assertions that Qualcomm's
Goldman Sachs added to the bullishness in a report that argues Apple's rich telecom subsidies -- recently thought to be at risk with AT&T and Verizon publicly touting competitive handsets -- will remain intact for the foreseeable future. No carrier wants to be the first to cut ties with Apple, especially now that we have T-Mobile's decline as evidence for what failing to carry the iPhone can do.
Then there's Dell, which reported an overall 4% decline in revenue in the latest quarter and a 12% drop in consumer products sales. A transition to a broader portfolio of technology products and services aimed at businesses is taking a toll, but so, apparently, are iPad sales.
Finally, Riverbed Technology rose after management added $150 million to an existing share repurchase program. Why? Executives believe the stock is cheap, which is the one and only reason -- and I mean ever -- to use shareholder cash to buy back stock.
The week that was
Just when it looked like the market would never rally again, it did. Both the Russell 2000 and the Nasdaq Composite rose more than 2% -- 2.57% and 2.11%, respectively -- while the S&P 500
Further bad news from Spain and millions in Facebook-related losses at Citigroup's Automated Trading desk did little to lift investor spirits. So what drove the gains? Consumers, apparently. The latest research into consumer sentiment shows we're as optimistic about jobs and wage increases today as we were in October 2007. Given what happened the very next year, perhaps that's reason for caution? Either way, the Chicago Board of Exchange Volatility Index, or VIX, widely regarded as the best gauge of fear in the market, dropped sharply as investors gained more confidence in their market bets.
See you back here next weekend for more tech stock talk. And remember to check out the Fool's latest special report -- "Forget Facebook -- Here's the Tech IPO You Should Be Buying" -- and add the Big Idea portfolio stocks to your Foolish watchlist for ongoing, up-to-the-minute coverage. Both the report and the watchlist are 100% free to Fools:
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Google, Rackspace Hosting, Riverbed Technology, and Salesforce.com at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
The Motley Fool owns shares of salesforce.com, Citigroup, Riverbed Technology, Google, and QUALCOMM. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Rackspace Hosting, Riverbed Technology, Google, salesforce.com, and Apple. Motley Fool newsletter services have recommended creating a stock position in Riverbed Technology. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bear put spread position in salesforce.com.
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