Rebuttal to Dow 13,000: Stocks for the dumpster

Posted Apr 20th 2007 2:45PM by Georges Yared
Filed under: Rants and Raves, Google (GOOG), Apple Inc (AAPL), Daimler (DAI), Exxon Mobil (XOM), AT and T (T)

My distinguished colleague and fellow bloggist Douglas McIntyre wrote an elegant piece about some stocks he thought should be sold -- or at least be considered for sale. I respectfully and wholeheartedly disagree with Douglas.

He thinks that Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG) and DaimlerChrysler (NYSE: DCX) have all run too much and are vulnerable to falling. I witnessed many a portfolio manager in the early to mid 1990's who missed the greatest move in technology because they were constantly afraid of something terrible happening to the earnings estimates. I also witnessed many portfolio managers selling Cisco, Microsoft and Oracle way too early because they "were expensive." These guys made anywhere from 30-50% profits, but completely missed the next 2,000%.

I am not implying that Apple, Google or Daimler have a 2,000% move coming their way. Not at all. The 1990's will probably never be replicated. But the principles of growth investing do not and have not changed. Google is a verifiable monster. It is no longer "the next..." anything. It already IS. Now, we'll be looking for the "next Google."

Google continues to beat Street revenue and earnings expectations. The markets it serves are both evergreen and growing beyond comprehension. Google is taking market share in a growing market. A win-win situation. Some portfolio managers didn't get the story 7-8 quarters ago and missed the last $200 move. Google has a better chance of going up another $200 then down $200. Growth investing is all about earnings growth and market-size addressability.

Apple is a story I have written about a lot. Apple's earnings have been on an upward trajectory and so have the operating margins. At the end of the day folks, it's all about the operating margins and the sustainability of those margins. Apple is a hardware company with near software margins. It is just scratching the surface of several growth platforms: iPod, iPhone, MAC, retail stores with the highest sales per square foot than any retailer in the world, and a new line of CPU's. Apple's earnings revisions will continue upward for the next couple of years.

DaimlerChrysler has moved up 30% since the hint at selling Chrysler. Yeah, and it will go higher once it unloads the drag on its earnings. Emotional or not, we all want Chrysler to make it and thrive, but the reality is Daimler wants out. Its shareholders want out as well. Daimler left alone has massive earnings leverage with Mercedes Benz. The cars, trucks and buses are world renowned and profitable as heck. Chrysler will need to be re-tooled and revamped. Earnings estimates will go up dramatically for Daimler the next 3 years once it unloads Chrysler. The shareholders want Chrysler dumped regardless of the unions. That battle will not be pretty, but eventually Daimler will win.

Douglas may be correct about ExxonMobil (NYSE: XOM) and AT&T (NYSE: T). XOM's earnings are directly related to the commodity pricing of oil. AT&T is subject to pricing model pressures and a very competitive marketplace of other players.

Douglas McIntyre is a talented writer and astute observer of the markets, we just happen to disagree. Then again, that's what makes a market: for every buyer there is a seller and vice versa...

Georges Yared is the CIO of Yared Investment Research. For more growth stock ideas please visit the web site

Tags: AAPL, DCX, GOOG, MSFT, T, XOM

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Reader Comments (Page 1 of 1)

4-20-2007 @ 4:31PM

ilene said...

I think this douglas doesnt know much about xom... perhaps its sour notes or whatever.,. try picking on something worth picking on... perhaps you should try buying some oil stocks and try picking on stocks worth picking on....

4-21-2007 @ 6:12PM

arthur pourciau said...

Douglas must not be aware how xom is working with erhe.

4-22-2007 @ 4:10PM

ANNE said...

Hi, no questiona about it, XOM is the best of the oils
and will continue to be, just wish their dividend would be more attractive such as CVX or RDSA. For us retired it helps us to pay our bills but we are so careful not to drive too much. It isn't easy is it? Anne

4-25-2007 @ 8:15PM

from the inside said...

Good fast eddie whitacre is up to his old tricks just wait for T to take a dive just like Ameritech did in the past...maybe just pumping up the price before he retires and dumps his stock he bought after he took it down the drain in the last 5 yrs