Savings Experiment: Snow Removal
Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerWhich is the better investment, Apple Inc. (NASDAQ: AAPL) or Bank of America Corp. (NYSE: BAC)? Most investors would take Apple's side. Even though there is some concern about the softness of iPod sales, almost no company has been more innovative over the last year in producing hot-selling new products. Unit growth prospects for the Mac and iPhone are the envy of the computer and handset industries.
Bank of America, on the other hand, is part of an industry where write-offs cannot seem to find a bottom. With housing and consumer credit getting worse, it is hard to predict how much more money center banks may have to show as losses in 2008.
But among the 20 most widely held stocks, so far this year, Bank of America has done the best, up 2.2%. Apple has done the worst, down 36.7 %.
The lesson here may be that the companies with the best commercial prospects may not aways do the best in the market, especially when they sport high valuations. A look at Apple's shares over the last year shows that they peaked in late December, up over 130% for the period. It did not take much in terms of a modestly weak forecast for the current quarter to start a bloody sell-off. Expectation had simply become too great.
At Bank of America, a look at the last year showed the stock had dropped almost 35% in mid-January. The shares are still way down for the period but the percentage drop is only 20% now. Wall Street seems willing to believe that most of the big write-offs are behind the bank and that bad news this year will be modest.
Apple may be asking itself if its actually good to be the company everyone thinks will do well.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
2-10-2008 @ 5:07PM
Harry said...
I wouldn't be too quick to bet that most of the bad news is behind financial companies, including Bank of America.
2-10-2008 @ 6:58PM
Caesar Reynolds said...
I will bet hard on APPL....I think it will hit the $300 dollars by the end of the year. My bet is based on new store openings in Europe and Asia as well as the release of the iphone in Asia.
2-10-2008 @ 7:35PM
Jim Hall said...
Your typical McIntyre no-nothing, tell-all, bullshit anti-Apple article.
What is your problem, aside from ignorance, that is?
8-06-2008 @ 11:27AM
Imac said...
No one knows...look at what has happened in the last few days.....and now with Citi's recomendation as buy and with a target price of approx. $220...this will get close to the $250....you will see it shine very soon.
2-10-2008 @ 7:23PM
Chris said...
Apple bashing, nothing more. Whatever is the point of gauging the long-term viability of a stock or a company by it's performance over a 5 week period?
2-10-2008 @ 7:42PM
douglas mcintyre said...
I did not make the share price go down.
Best
Doug
2-10-2008 @ 8:20PM
Sheldon L said...
Doug makes a strong point that stocks with high P/E's have high expectations and drop fast when any doubt ensues.
Apple will not be $300 by the end of the year -- no way no how. That implies a P/E of 35 to 40 which investors are not likely to be willing to pay at that time. I do think it will be higher than it is now so today is a much better entry point than December was. That was silly money time and as you can see from the current price the big smart money took their profits and ran.
2-10-2008 @ 9:27PM
KenC said...
The problem here, is that Doug makes assumptions based upon the calendar year. How many people coordinate their investment strategy by the calendar? And, how does that teach any sort of "lesson in investment timing"?
In fact, doesn't it say more about fundamentals? Apple's price got ahead of itself? Now that valuations are back to a somewhat more normal range, what does that say? Isn't that more interesting than talking about investment timing, based upon putting your eggs in at the beginning of the year?
I'm not even going to go into Doug's typical trader mentality that has no real understanding of the companies he writes about.
2-11-2008 @ 4:56AM
John Amaro said...
Kenc, you're right....
Calendar year means nothing unless you purchase stocks on January 1st!
Apple looks like a nice investment around $118/share..
2-10-2008 @ 9:57PM
twin88 said...
Go Doug,
2-11-2008 @ 10:59AM
Kumar said...
So what is your point? It really doesn't matter what company you invest in? Just pick one blindly without studying the company's prospects since they all end up being the same? Doug, you need a hobby and blogging on stocks is not one of them. L!
1-08-2010 @ 11:11AM
george scandalis said...
Doug,
You always make the interesting point even when, in of itself, your point has no real merit in the real world.
You're a perfect sound bite type of blogger, an attention grabbing headline followed by nothing but the hissing sound of all reasoning and logic escaping your blog.
Your point is completely lost on anyone with a calendar with more than 5 weeks in it.
You sir, prove that the empty vessel makes the most noise.
George
2-11-2008 @ 12:13PM
douglas mcintyre said...
George,
Thank you for your pleasant comment. As you know, this is a piece about relative valuation over time, not day trading.
Doug McIntyre
2-11-2008 @ 3:50PM
sbdfort said...
According to Thompson's charts, including splits over the past 10 years, one went from approximately $37 to $42. The other went from approximately $12 to $120. Which would you prefer as a gift for your grandchildren?