Apple Should Top Your Panic List
Dana is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Early 2009 was a great time to be a buyer of stocks. There were some incredible bargains, because the markets were panicked. If you kept your head, you made big money.
The “Fiscal Cliff” panic is another opportunity. Hope for the worst – an agreement to minimize austerity reached a week or two from now – and pull out your “panic list.”
You do have a “panic list,” don't you? It's a list of the stocks you wished you owned, but that are always too pricey for you to consider. Even the best-run companies can be bad bargains when their price is at a huge premium to the market.
My own list would be headed by Apple (NASDAQ: AAPL). Its earnings multiple, below 12, is a discount to the S&P, which is around 14.5. There's a dividend yielding 2.65% as this was written. Its fall from the $700/share range to its present price of $513 is due to the fact that so many people own it, and own so much of it, that we all feel its weight in our portfolio. Its current market cap of $482 billion is a substantial part of the whole market, and its movements place a heavy drain on the averages no matter which way it turns.
But, still. It is the dominant player in the consumer electronics space. It has defined the modern consumer electronics space. Mashable says they're developing a watch for next year, one that can act as a controller for your iPhone, through Bluetooth, and also makes calls. Wired says the Apple TV is definitely coming next year, and it may even be working with Samsung, which could indicate a move toward patent peace between the two rivals.
It's true that Steve Jobs is dead, but Tim Cook is turning out to be better for shareholders, and other publics, than Jobs ever thought of being. With questions of design and innovation out of the CEO's office, the company is finally working on the business instead of in it. The team Cook is building works in harmony, a lasting corpoate culture is being built. Apple is becoming more than a great company, it's becoming an institution, and while that may sow seeds of destruction later on, you still have a long ride ahead of you.
Meanwhile, the company has barely begun to capitalize on its dominance of after-market channels. You do know that tablets can do to TV what the iPod did to music, don't you? And Apple wants 30% of everyone's gross, off the top – they're getting it in music.
Yes, Android is doing well. Yes, Amazon (NASDAQ: AMZN) is doing well. So what? Yes, Apple's margins are coming down, but content sales should make up the slack. There's a lot more growth here than anyone now realizes, and if you find it at all risky, remember that you're not really paying a huge risk premium. If we get a real panic and it falls to $200, grab it. It will give you a return from there.
I think IBM (NYSE: IBM) should be on everyone's panic list. The company has quietly taken the leadership in "private cloud" computing, and while it will never be a go-go stock it's always a go-to on weakness. At its present price of $186/share it remains pricey, an earnings multiple of about 13.5, slightly lower than the average. A "panic price" of, say, $170/share might be a real bargain, and I would expect that in a panic as the multiples paid for past earnings would also go down.
Finally, there is Wal-Mart (NYSE: WMT). I wouldn't touch Wal-Mart at present prices. In a growing economy I think they may face some headwinds, and the earnings multiple is even higher than that of IBM. But in a panic economy, if the shares fall to something like $50/share, then it becomes impossible for me to resist it. The company is going to survive, regardless, and the only question for investors is the price you buy it at. If you can get a bargain on it, then it's attention Wal-Mart shoppers.
A panic is an opportunity to buy, just as a boom is an opportunity to sell. When everyone is happy, that's when you need to go get some cash, dump your garbage. It's when everyone is running around, hair on fire, certain that the world is going to end last week that you need to pull out your panic list, check the prices, and grab the best bargains in the bins.
Which stocks are on your panic list?
DanaFBlankenhorn owns shares of Apple and International Business Machines. The Motley Fool owns shares of Apple, Amazon.com, and International Business Machines. Motley Fool newsletter services recommend Apple, Amazon.com, and International Business Machines. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!