Out Of The Mouths Of Babes Come Stock Ideas
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Maybe you think a 16 year old actress can teach you nothing about stocks. My very first Fool post was about actor Shia LeBeouf and his heads up on McDonald's which surged almost 30% that year being the best Dow performer after his call on David Letterman. Rachel Fox, 16 year old actress, trades on her phone on downtime between takes and has an interesting blog. Her post about Apple (NASDAQ: AAPL) thieves was particularly intriguing as I was already thinking about two other companies whose products thieves have been targeting, Procter & Gamble (NYSE: PG) and Mead Johnson Nutrition (NYSE: MJN).
Apple Is A Steal
There is a global crime spree targeting Apple products. In China pop up counterfeit Apple stores have been a problem but the boldest thievery was on New Year's Eve in Paris when armed robbers stole Apple products worth $1.3 million. A 40% rise in what's called "Apple picking" actually raised the crime rate in NYC according to Mayor Bloomberg. Last year in Japan thieves made away with $95,000 in iPhones before the iPhone 5 launch.
What's most interesting is a comment by the NYPD that, "As if to mirror the market place, thefts of Apple products increased this year as the theft of electronics by other manufacturers decreased." This is almost a no brainer. Thieves aren't that smart, (witness the gang in Tennessee who rammed a truck into a Best Buy loading dock door hoping to steal new iPhone 5s only to find the store hadn't yet received them) but they know what people want and what they want is Apple; so much so it raised NYC's crime rate by 14%, the first rise in the crime rate in two decades. And what thieves don't want are Samsung, Nokia, and BlackBerry phones. Thieves are also stealing iPads, iPad Minis, iPods and MacBooks. Apple iPhone owners should note the company is working on an anti-theft accelerometer.
Crime statistics aren't a metric to necessarily trade on but what they do indicate is demand...a lot of demand. Apple has regained a little share price appreciation mainly due to the Einhorn proxy news but it's muted the real story about worldwide demand. Frankly, Apple is a steal now...how many big tech companies have a 10.44 P/E and a 2.30% yield and have such a cult following? And a PEG under 1 at .55? And no debt? Anyone? Anyone? Bueller? Bueller? Not IBM, not Microsoft, not Google or Amazon.
There has been a lot of punditry about what Apple should do with its cash and hand wringing over how lowering the price on MacBooks ruins the high end image of Apple. All noise. Still the best retailer out there and until I see my Apple store empty on a weekday I will pound the bull table. And if Apple can make that big move into China with China Mobile or make a slightly less expensive iPhone for the emerging markets or best of all, raise the common yield just a hair, I might break that table.
Is P&G A Gamble Or Sure Bet
Tide detergent has also become a black market commodity, of all things, and it's because it's a recognizable, desirable brand name. Or so say several crooks who've been boosting it to sell for pennies on the dollar. Isn't it a little heartwarming to think lowlifes care about clean underwear? Tide is just one of the many iconic brands under the Procter & Gamble umbrella.
P&G 's P/E is getting somewhat extended here at 17.37 and at 52 week highs. Its yield is 2.90% and PEG is 2.37. While P&G is a Dividend Aristocrat, competitors in the consumer staple space like Clorox, Colgate-Palmolive, Unilever and Kimberly-Clark are better values. Procter & Gamble is relying too much on consumer staple brand loyalty when that is a concept that fading away like landline phones.
Analysts only expect 7.95% five year growth (yoy) compared to the Apple growth rate of 18.95% and have a median price target of $80.00, which is around 5% upside. Ho-hum.
Into The Mouths Of Babes
Maybe it's been years since you've bought formula but it's often locked behind glass cases these days. The criminal element calls it "liquid gold" and the problem has escalated so that the FBI and Customs has had to get involved. As the formulation of formulas are regularly improved with new pediatric nutrition findings prices get raised making them black market darlings.
Mead Johnson Nutrition, global infant formula and children's nutritional maker, was having a pretty great year from May 2011 through the summer of 2012 when it surged from $55 to its 52 week high of $88.72 and then released Q2 earnings in July that revealed it had been losing market share in China and foresaw a weaker second half than previously guided. The stock sold off big despite a 26% profit surge from infant formula sales in emerging markets (save China.) Ouch!
Since then CEO Stephen Golsby managed to keep his promise that Chinese share would pick up and the Q4 earnings release proved it with Chinese market share back up to 11.7% and non-GAAP EPS growth of 10% sending shares up double digits.
Mead Johnson Nutrition is trading at a pricey 26.96 P/E and has a 1.50% yield. Analysts expect 11.05% five year EPS growth (yoy) and have a mean price target of $81.00 with a high price target of $95.00.
Do You Trust A Fox?
Maybe you don't trust a teenager who's outperformed the S&P with a 30% return. She likes oversold stocks and that would be Apple. I think it's still a steal but the other two are definitely wait and see with Mead Johnson Nutrition being the better deal with more growth going forward, but Apple beats them all.
leglamp has no position in any stocks mentioned. The Motley Fool recommends Apple and Procter & Gamble. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!