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Apple or Microsoft, which is cheaper?
It is all over the news that Apple (AAPL) surpassed Microsoft (MSFT) market capitalization last week becoming the largest tech company from that metric perspective. The question is which one is more expensive?
Assume you have $500 to invest and you are trying to decide which one is a better bet. Let’s see. On June 10th, Microsoft opened near $25 and Apple near $250. So you could buy 20 MSFT or 2 AAPL. So what are you really buying with your hard earned bucks? Based on the prior 12 months and latest financial statements these are the numbers (rounded):
AAPL: revenue $51B, Net Income $10.7B, Cash and Short term investments $23B, and a market cap of $227B (908 M outstanding shares).
MSFT: revenue $59B, Net Income $17.2B, Cash and ST investments $39B with a market cap of $218B (8720 M outstanding shares).
So if you buy 2 shares of Apple your $500 buy you $112 in revenue, $23.50 in NI, and $50.70 in cash. Microsoft’s 20 shares are $135.3 in revenue, $39.4 in NI, and $89.4 in cash. In other words, picking one metric, let’s say cash, Microsoft is trading at 5.6 times cash, Apple at 9.8 times cash. That is 1.76 times more expensive!
Now, let me throw Google (GOOG) into the mix, just for kicks: Google was trading at around $480 with a market cap of $115B (240M shares). Revenues of $25B, Net Income of $7.1B, Cash $26B. You can buy 1.04 GOOG, meaning $108 in revenue, $30.8 NI, and an impressive $113 in cash (4.44 times cash).
So you tell me which one is more expensive? I know, I know, this is based on past results and does not factor in growth potential, investor’s sentiment, cult followers, and other factors. But for the same reason it clearly paints a picture of which company is more favored by investors and which one is less.
Consider one last point: Microsoft hit an all time high of $58.37 on December 31, 1999, Google $724.80 on December 14, 2007, and Apple hit $272.40 on April 26, 2010. Investor’s favoritism has been shifting over time. What’s next for all these three? If I knew, I wouldn’t be blogging about it but it is definitely interesting behavior of 3 of the most traded stocks.
Quoting Scott Adams, the creator of Dilbert, “I remind you to ignore me”. By no means this is an endorsment to invest in any of these companies. You, my fellow reader (singular) make your own judgment.
Enjoy.
Ma Bell teaches us a lesson
In the shadow of Apple’s kick-butt quarter, AT&T reported results that made the market yawn. “Yeah, yeah, you sold 2.7 million new iPhones in the quarter, added 1.9 million subscribers for a total of 87 million (1 in every 3.5 US residents uses AT&T), reduced churn, and increased ARPU (average revenue per unit) 3.9%, and a 30% increase in data revenue; so what?” is essentially what Wall Street said. I don’t know about you, but a company that still manages these numbers in a market that is essentially 100% penetrated is impressive – sure, a 6%+ dividend helps . But the really impressive, albeit insignificant number to this humble blogger is the “connected devices” increase of 1.1 million to a total of 5.8 million.
AT&T has close to 6 million non-phone devices on the network. Now why is that even relevant, my fellow reader (singular)? Simply because there are a lot more non-phone devices and a lot more things out there that need to be connected than there are phones or people. Yes, they may not be sexy, play music, browse the web, or even wash your car, but they essentially do everything else. Beyond the obvious (Kindles, iPads, etc.) these things are everywhere and in desperate need to be connected.
Take your car, for example. If you have Onstar it’s already connected (not with AT&T) so you know some possible apps. But imagine a world in which you go to Google Maps, plan a route and squirt it into your car’s GPS! Or simply download the movie you want your kids to watch from your home DVR. Your electric meter one day will be connected to so you can monitor your consumption real time (Ok, Ok, i don’t know why would I want to do that either, but you can). Every thing out there can be connected and can benefit from the internet. But where things really start changing is with Enterprise Applications.
Next time you receive a FedEx or UPS package go to the web immediately after you sign for it and voila it says received, in real time because the device where you signed is connected. The copier service personnel can consult schematics and order parts in real time when his/her machines are connected. Or the copier can ping someone when it’s running out of toner; the end of the empty copiers or useless service visits. Making every device a smart device has endless applications that are starting to look affordable. Ma Bell’s humble cellular non-phone numbers are starting to show growth. The ubiquitously connected world is getting started. Make sure you are ready for it.
Enjoy.
The Trend of Trends
I was doing my stock research last night when I bumped into Google Domestic Trends. I know it is not new at all and it is really one of the things Google does best: manipulate data and make some sense of it. It cought my attention, though since one of the cardinal rules of stock trading is pick the right sector.
The way it works, it appears, is that Google (no surprise) keeps track of certain keyword searches and categorizes them into sectors of the economy. Then they create a chart that maps the trend of search, theory being that the search trend can be mapped to the sectors’ growth trend. For example. If you look at unemployment for example you will see the chart “hockey-stick” up towards the end of 2008. Nice! The value is normalized to 2004, so the chart says that unemployment searches have tripled since then. Has unemployment tripled too? Maybe not quite, but the trend is pretty clear, though.
Continue …
Your Real "Real Money"
Cramer writes as he speaks: a little too cocky, self confident, straightforward, candid, and with a couple of “insider” jokes that make you think he is the only one that finds them funny. It is a great flight book (that is a book to read on a boring 6 hour flight). That being said, the book is a good collection of sane (yes, I said sane) advices for the novice and no so novice investor. His stock-picking rules are a good organized way to summarize the basics of disciplined investing / trading. I have two pet peeves on his recommendations: the way he defines diversification (which is not exclusive of Mr. Cramer), and the 5 stock limit for part time investors. Let me explain.
Stocks Suck!
We hear all the time that investing in stocks is the best way to grow your money in a passive way. Over the long run stocks have always outperformed other asset classes. hmm… let’s see: The Dow Jones Industrial Average (DJIA) closed at around 380 points on August 1, 1929 with a volume of some 3.8 million shares. 80 years seem like long term, right? $1000 invested in the DJIA on August 1, 1929 will be worth today, May 1, 2009 $21, 529 with a volume of around 10 billion shares. Pretty good. If we assume a 3% inflation rate for 80 years, it is equivalent to $2029 in 1929 dollars. The chart on top shows our inflation adjusted grand invested in August 1929, of course backwards. We doubled our money in 80 years! It doesn’t seem like a lot, now does it?
Diversified or Balanced Index.
Dow Jones price weighted averages
If you are invested in a fund that follows the Dow Jones Industrial Average (DJIA) the chart on the left shows the percentage allocation you had on February 23, 2009 by index component. You may think you are diversified, which is true, but you are by no means balanced. 10% of your investment is in IBM shares and less than 1% is in GM. Although you may be thankful for the latter it makes the point that you are not balanced at all. This has to do with the way the DJIA is calculated. Diversification is all you hear from Cramer to Orman to your local financial adviser. The indexes, major indicators, or SMIS (Security Market Indicator Series) like the Dow Jones Industrial Average (DJIA) or S&P500 are a sure way to diversify since buying into them means buying 30 or 500 companies from technology to financials to automotive (good luck with the last two). That is fundamentally correct. However, the way the index is calculated is the trick, especially in times of turmoil like the present.
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