Apple Inc (AAPL)

(A Top Pick Dec 19/12. Up 7.73%.) Thinks there are a lot of exciting things happening for 2014. The biggest and most important are new products. We need another wild product and if we get it the stock is going to do extremely well. Not only will earnings, revenues grow, but there will be a revision of the multiples upward. These are the 2 things that really drive stock prices. Carl Eichorn is pushing for a stock buyback, so capital allocation is a possible catalyst for a higher price. Also China Mobile is going to add a lot of units, which is another support under the stock.

This stock could see some significant up move in 2014. China Mobile helps and there are new products that are definitely on the way in 2014. Sees improving demand for smart phones. For every phone sold, only 30% of them are smart phones globally. Valuation is cheap and you are not paying a lot for earnings. Doing all the right things.

(Market Call Minute) Once you get to be the biggest by market cap there is nowhere to go but down. Won’t make you much money over the next few years.

The only near-term catalyst that he sees is that China Mobile, which has billions of subscribers, is talking about launching the iPhone, which would be a big deal for the company. He is not a fan of this company.

(A Top Pick Dec 19/12. Up 9.95%.) Have their mojo back with their existing product offering. 5S phone is doing extremely well. Has been terribly undervalued the last 2-3 years on just their existing business. Feels their existing business can take them into the $600s and maybe to an all-time high. The really exciting thing is what they come out with in 2014.

Cheap by any financial means. This is why value managers and growth managers like it. You can expect that they will do more share buybacks and more dividends. They are so big though, they need to have revolutionary products to keep the momentum going. He looks at it as the next Microsoft (MSFT-Q), maybe a steady return and a good dividend but you shouldn’t expect too high a return out of this one.

Has about 15% market share in smart phones. They make about $200 net after taxes on each cell phone. 15% on 1.7 billion phones, that is $50 billion in profits, just on smart phones. Buying back stocks. Can see them earning $90 a share 3 years from now. Yield of 2.23%.

Thinks they are going to have a spectacular quarter this time. Have had the iPhone 5S for the whole quarter. Sales have been going tremendously well starting from the very 1^st weekend. He feels this is the #1 stock in his portfolio in terms of waiting and risk/reward profile.

This is a growing pie as smart phones, through the end of the decade, are projected to grow at an annual rate of 15%, which is pretty rapid growth. There is lots of room for good quality providers. This company satisfies the high end of that group. Margins are being maintained. The big knock is that there is no innovation, but he doesn’t care about the leapfrog process. They’re going to do fine with support revenue and cash flow growth. The real innovation is new products. They have said that the latter part of this year and 2014 are going to be a time when we are going to see a lot of new products.

Obviously a great company and not an expensive stock from most valuation metrics. His issue is that a lot of their margins come from the iPhone and people can be very fickle about these types of products. It will be hard for them to make massive leaps in their phones. Expect that margins will come down on iPhones. Expect you won’t see much on the stock push but will probably see more dividends and shareholder friendly stuff.

Still the premier brand that is out there as it relates to iPads and iPhones. They can continue to push that brand further. Investors are just going to have to get used to when they ramp up products, the R&D costs that go into the building out of these devices, margins are going down. Not overly expensive. Well managed company. Expects there will be continued product innovation from them, such as a watch, TV, etc. Thinks it could get close to the $600 mark.

He had a big run and his experience is that consumer products like this take a big run and then roll over and die. So now he feels it is an on-going battle of whether they will make the quarter or not.

Cheap on statistical measures. The problem with Apple was “what have you done for me lately”. After the iPhone and the iPad, you need something enormous and game changing. Stock price chart is starting to look like a lower high and lower low. Once you get to be the biggest company in the world, you can’t keep growing like you had. It will be difficult for them to do as well as they have over the last 5 years. Turning into a value stock with a decent dividend yield and stock buybacks. Longer-term it will be difficult for them unless they come up with a new wonderful game changer.

He is one of the few people that have been a bear on this stock for a long time. Over the last 3 years, the stock has effectively tripled in revenues so investors have seen a substantial run up in the shares. As a consequence, it has accumulated a ton of capital and is finally returning some of that to shareholders. He questions how you can maintain that kind of momentum. As momentum slowed, institutional investors have sold down. Feels the stock has to go lower before it is really attractive.

Trades at a .68 peg ratio. They have a lot of cash on hand. Seems they are willing to make cheaper phones. Trying to copy what others in the world are doing.