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Motley Fool: Apple continues to represent solid buying opportunity

Sun., Dec. 2, 2012, midnight

Shares of Apple (Nasdaq: AAPL) have fallen 20-something percent from their 52-week high. That makes this stock even more attractive.

Apple is one of the most innovative companies of our time. Its detractors think it has lost its edge, and the loss of visionary founder Steve Jobs also hurts it. But Apple continues to innovate within its established product lineup. Think: retina display, battery technology, Siri and its user interface.

One of the key things binding customers to Apple is a uniform integration of hardware, software and third-party apps into its different products. Apple’s iCloud is a great example of this as it wirelessly syncs and stores your media content (music, contacts, apps, calendars, etc.) on all of your iOS devices. Therefore, users are less likely to move outside Apple’s ecosystem to an Android or Samsung device.Heading into the holiday shopping season, new product launches, including the iPhone 5 and iPad Mini, bode well for the tech giant. Demand is strong. Bears worry, though, about competition and legal challenges, and whether Apple will continue to innovate successfully.

Still, with a price-to-earnings ratio of 13, billions in cash and zero debt, Apple presents a solid buying opportunity for patient investors.

(The Motley Fool owns shares of Apple and we’ve recommended it in our investing newsletters.)

Ask the Fool

Q: What is General Electric’s “market cap,” and what does it mean? – T.L., Goshen, Ind.

A: A company’s market capitalization reflects the value the stock market is placing on it right now. To get it, you multiply the total number of shares outstanding by the stock price. The result can help you get a sense of whether the firm is overvalued or undervalued if you compare it to peers.

In GE’s case, 10.5 billion shares times a stock price of about $20.70 yields a market cap of $217 billion.

That $217 billion is a hefty number. It’s more than the market cap of Coca-Cola (which was recently $162 billion), PepsiCo ($106 billion), Verizon ($121 billion), Oracle ($146 billion), IBM ($214 billion), McDonald’s ($85 billion), Merck ($134 billion) and Boeing ($55 billion).

To compare, Apple’s market cap is the largest, recently near $510 billion, followed by ExxonMobil, near $400 billion, and PetroChina and Wal-Mart, each around $244 billion.

(The Motley Fool owns stock in some of these companies and we’ve recommended them in our investing newsletters.)

Q: What does it mean when I see that “today’s volume” for a stock is 15,800,000? – D.B., Victoria, Texas

A: Imagine Mops ‘n’ Brooms (ticker: SWABZ), “Providing actionable domestic engineering solutions that leverage and optimize client excellence with a relentless focus on driving shareholder value going forward.” If its average volume is 15,800,000, that just means that 15.8 million shares of the stock typically change hands each day.

Volume can vary widely – Apple averages about 18 million shares per day vs. 5.7 million for Boeing. If a stock’s volume is much higher than its average, then something is probably going on, such as good or bad news.

My dumbest investment

My shares of Groupon have been dropping like a rock since I bought them. I heard that it’s paying a 5 percent dividend, which sounds good. But am I better off getting out of the stock now? – F.B., online

The Fool responds: First of all, Groupon does not pay a dividend, and it seems unlikely that it will initiate one any time soon, as the company is not yet posting consistent profits.

Many folks jumped into Groupon when it had its initial public offering last year. It was trading in the $20s back then and has been below $3 per share recently.

Groupon offers great lessons with its many red flags. The “daily deal” market is seeing its novelty wear off. On the plus side, the company’s revenue and subscriber base is growing, but revenue per subscriber is shrinking. Net losses are growing, too. Some see the stock as a bargain now, but it’s risky and may fall further.



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