In this article, I will be discussing Apple as well as four other companies that have recently sparked investor interest due to recent events surrounding each company. I chose these five companies because they are all reacting to events which could make them attractive to investors.
Apple Inc. (AAPL) just announced that it is making a landmark move by allowing the Fair Labor Association to inspect its facilities in southern China. Apple actually uses a contract manufacturer called Foxconn to produce much of its hardware, and activists from around the country have called into question the working condition of these factories. Another problem for Apple in China has been a trademark dispute. In fact, The State Administraton for Industry and Commerce in Shijiazhuang's Xinhua district is taking iPads off the shelf until the matter is resolved. Specifically, Proview Technology registered the iPad trademark in China over ten years ago, although Apple is working hard to keep its iPad brand intact. In my opinion, these Chinese issues shouldn't scare away investors from buying Apple stock. With price to earnings, price/earnings to growth, and price to sales ratios that are all lower than Google's (GOOG), it appears that Apple still has room for more price appreciation. With quarterly revenue growth at 73.3% year-over-year and operating margin at 33.87%, Apple's statistics are simply unprecedented considering it's mostly a hardware company. It's worth noting that phone subsidies on the part of carriers like AT&T have played a large part in Apple's high margins. For these reasons, I believe Apple is a buy right now.
Intel Corporation (INTC) just managed to settle an important lawsuit for only $6.5 million. Indeed, former New York attorney general Andrew Cuomo had sued the company for violating antitrust laws, although some court decisions along the way severely weakened the state's ability to prosecute. Another story for Intel comes in the form of its newest solid-state drive. These new extremely high performance storage services appear to be the future for top of the line computing, and I believe that Intel's SSD 520 Series is a major breakthrough. For both gamers and professionals that demand the best computing experience possible, the Intel SSD 520 should be both fast and reliable. I recommend that investors looking to make a technology play right now seriously consider Intel, especially because the stock also offers a dividend yield of 3.1%. Future growth will lead to new dividend increases, and Intel clearly has the operating cash flow to make dividend investors happy. Specifically, the company had $16.692 billion of operating cash inflow in 2010 and $14.3 billion of operating cash inflow in 2011. Large amounts of that money went to buying back stock, which should be taken as another sign of Intel's confidence. I expect the stock to gain momentum throughout the year, and rate it a buy at current price levels.
Cisco Systems, Inc. (CSCO) just released an ambitious new plan to get in on the desktop virtualization craze. By bundling both VMWare View 5 and Citrix XenDesktop with its Unified Computing System, Cisco hopes to help companies reduce its costs for servers and security. Cisco also reported earnings recently, in which they beat analyst expectations handily. While Wall Street estimates averaged revenue of $11.23 billion and earnings per share of 43 cents, Cisco delivered revenue of $11.5 billion and earnings per share of 47 cents. Regardless, Cisco management remains cautious. CEO Frank Calderoni said, "We're taking this one step at a time -- we have made a significant transformation in the company in the last several quarters. It's prudent for us to be conservative -- we want to be able to set expectations around our three-year model." I think this approach makes sense, which will allow Cisco to achieve growth without any of the overly aggressive mistakes it's made in the past. (Cisco's attempt to break into the consumer market comes to mind). At a price/earnings to growth ratio of 1.25, this stock is notably cheaper than competitors like Hewlett-Packard and Juniper Networks. I rate this stock a buy right now.
Exxon Mobil Corporation (XOM) has hit a bit of a speed bump because Iraq is disallowing it from bidding on oil and gas exploration contracts. Exxon Mobil recently signed a deal with Kurdistan's regional government, which promptly caused disdain on the part of the Iraqis. Exxon Mobil is also making waves in Nigeria. The company is teaming up with Nigerian National Petroleum Corp. to try to secure a $1.5 billion loan for development of offshore oil fields. Another exciting partnership for Exxon Mobil has been with Petrom, which is a unit of OMV. Indeed, the two companies of have found natural gas in their Domino-1 well, located in the Romanian part of the Black Sea. Between this development and the plans in Nigeria, I think it is clear that Exxon Mobil is well positioned for the future. The dividend yield is currently 2.2%, and new findings may eventually allow the company to increase dividends. For the time being though, Exxon Mobil is performing quite nicely. Operating cash inflow for the first three quarters of 2011 was a whopping $44.594 billion. I believe Exxon Mobil shares are positioned to rise in the coming quarters.
General Electric Company (GE) just announced an ambitious $580 million expansion of its Aviation unit. While CEO Jeffrey Immelt mostly talked about General Electric's role in the American economy at the press conference, the truth is that the Aviation unit should grow significantly as a result of these actions. In other news, General Electric is starting a new joint venture with fellow market cap titan Microsoft. Here's how the companies described the relationship: "The new company will develop and market an open, interoperable technology platform and collaborative clinical applications focused on enabling better population health management." With the immense growth that the healthcare industry has been experiencing, I fully expect both companies to profit handsomely from this move. I wouldn't be surprised if General Electric increases dividends soon, and the stock already has a solid 3.6% dividend yield. With an operating cash inflow of $24.223 billion for the first three quarters of 2011, General Electric was able to pay off a large portion of its debt. As those debt levels come down, General Electric's balance sheet will be even further strengthened, although it is worth noting that GE Capital just sold $275 million worth of bonds. Despite this, I believe GE's financial capacity and strong drive for innovation will help the stock gain momentum going forward.
About the author:
I fundamentally analyze every business from the top down.
In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.