How Apple can make you money without buying its shares
by Tom Fennell, Yahoo! Canada Finance
Wednesday, July 28, 2010
Apple has been a market juggernaut with its shares climbing 600 per cent in the last five years, and according to Bloomberg only three companies in the S&P 500 have outperformed it during that period.
With each passing quarter, investors who want to own the stock - now at $260 ¬- have been hoping for a stock split.
Apple has split three times in its history, usually in the $120 price range.
Splits won’t affect that value of your holdings if you’re lucky enough to own Apple, it just makes it cheaper and allows small retail investors to buy it.
And when Apple failed to make a split announcement with its earnings release on July 20, there was a lot of disappointment in the trading chat rooms across the world.
If you can’t afford $260 a share, there are other ways to cash in on Apple and that’s by investing in companies that will profit on its revolutionary products and in the way that it is changing the face of computing.
The nice part is many of these companies are trading at prices that small investors can afford, but have also moved higher almost in tandem with Apple.
Here are four companies that are riding Apple’s coattails. And with the exception of AT&T, they have more than doubled over the last year as Apple surged higher.
AT&T, which is the exclusive carrier for Apple’s iPhone in the U.S., has been trading between $24 and $29 over the last 52 weeks, but many analysts expect it to move higher as the iPhone extends its dominance.
Analysts described the company’s recent revenue-generating performance in one word: “great.” One prominent market-watcher put it another way, saying “Thank you Steve Jobs!”
In fact, Apple sold 8.4 million iPhones in the second quarter, a 61 per cent increase year-on-year, or 92,000 a day. How much does that translate into for AT&T?
According to the Yankee Group, the iPhone will be worth $1.8 billion in sales to AT&T this year, and will generate $9 billion in revenues over the next five years.
And because people seem to love them, the Yankee Group says 77 per cent of iPhone owners say they would buy another one, compared to just 20 per cent of customers using Google’s Android phone.
While the market continues to weigh the impact of the iPhone on AT&T’s future, Salesforce.com has jumped from $43 to $100 over the last year, in part because many investors believe the Apple iPad is a PC killer.
A lot of analysts also think so, thanks in part to the growing trend toward “cloud” computing. The iPad lets you download and store work on the Internet, in effect freeing you from your PC.
So far Apple has sold more than 3 million iPads, and when an Apple executive was asked if the iPad would cannibalize Apple’s iMac computer line, he said it wouldn’t be all that bad because there are an awful lot of PCs in the world.
That brings us back to Salesforce. It was founded in 1999 by former Oracle executive Marc Benioff, and went public June 2004. It helps companies facilitate cloud computing, which makes PCs redundant, by developing enterprise platforms through its innovative AppExchange directory of on-demand applications.
The computing world likes what Salesforce is doing, and it reported $1.3 billion in annual revenue for fiscal 2010, ending Jan. 31, 2010. That’s an increase of 21 per cent from last year, and Benioff says the company had “the fastest growth of any comparably-sized software company in the world.”
VMware Inc. is another company in the cloud-computing space with Apple applications that has more than doubled in the last year from $30 to $80. One of its main products is VMware Fusion, a virtualization software for Mac OS X. Its latest version 3.1 is said to be faster than ever, with a focus on graphics.
The company posted strong second quarter results, with revenues up 48 per cent from the second quarter of 2009. Mark Peek, VMware Chief Financial Officer predicted more to come: “For our 2010 annual revenues, we are raising our guidance to be in the range of $2.725 and $2.8 billion, an increase of 35 per cent to 38 per cent from 2009.”
F5 Networks has moved $33 to $87 over the last year, largely because as the computing world moves further into the clouds, there is a constant need to improve Internet security and speed.
Enter F5 Networks, whose products manage and route computer network traffic. It’s also expected to benefit as the iPad expands its footprint in the corporate world.
F5’s profit soared on surging demand in the second quarter, with the company earning $40.5 million, up 78 per cent over the same period last year. |
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