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Apple: Stock of the Year

Written By Brian Hicks

Posted December 29, 2010

Things were a lot easier when I was kid. Back then, all you needed was a pair of Jack Purcells and mood ring to fit in.

Today, it’s an expensive pair of Nikes and some sort of iThingy.

At least, that’s the case in my house — where my kids had been pestering me all year for the latest electronic gadget sprung from the minds of the folks at Apple Inc. (NASDAQ: AAPL).

And this year, my kids hit the trifecta.

Against my better judgment, all three of them got an iTouch… which drives me up the wall, since they would rather fiddle with them than do practically anything else…

I’ll be honest; it gives me a great deal of delight to confiscate them all for even the smallest infraction. But I am comforted to know they won’t be eating alone at the “nerd table” in the cafeteria when they go to school.

In this case, it was something of a tradeoff, as Apple products seemed to be everywhere I looked this Christmas: from iPods to iTune gift cards, my family was certainly doing its part to keep Apple at the top of the stock charts.

In that regard, we were just one family among millions…

Stock of the Year

That’s why, when it came time to choose my Stock of the Year, Apple Inc. was at the top of the list.

Edging out a big move by Netflix (NASDAQ: NFLX), Apple continued in 2010 to show why it is simply one of the best-run companies in the entire world — not to mention being completely dominant in the tech sector.

Did you know that while Apple shares rallied 50%+ in 2010, the rest of the “big names” in tech were basically dead money? 

(Among them were Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), Hewlett Packard (NYSE: HPQ), Cisco Systems (NASDAQ: CSCO), and Intel (NASDAQ: INTC), which all underperformed in 2010 — making Apple’s success that much brighter by comparison.)

In an otherwise down year for the other big guys, Steve Jobs and company knocked the cover off the ball again:

aapl chart

That big move comes after the stock doubled in 2009.

To date, only ExxonMobil (NYSE: XOM) has a higher market capitalization.

Home of the top CEO

But when it comes to taste in all things digital, Steve Jobs is a man with an uncanny knack for the pulse of consumers everywhere… So much so that it’s hard to imagine exactly what the tech sector would look like without him.

That’s how good he is. Let’s face it: I could easily double up and name Jobs CEO of the Year.

The guy is rock star — a simple fact not lost on Apple investors or, for that matter, on Microsoft’s Bill Gates.

Gates has known all about Steve for some time now. Speaking at the All Things Digital conference a few years ago, PC Guy said about Mac, “I would give a lot to have Steve’s tastes. He has an intuitive taste for both people and products that is very hard for me to explain.”

Jobs, as Gates pointed out, has “it” — something few people can ever explain, or better yet, achieve.

And the cold hard truth is that “it” can’t be bottled up or reproduced, proving once again that even in giant companies, people matter.

But as good as Jobs has been, there is an entire cutting-edge company that stands behind him. With the economy now climbing out of a deep recession, Apple’s future goes well beyond the talents of just one man…

Unlike most companies, Apple is never content to work within into some tired old box. Instead, it creates new boxes entirely, capturing more and more market share along the way.

As Jobs himself recently admitted, “Our goal is to make the best devices in the world, not to be the biggest. As you know, Nokia is the biggest and we admire them for shipping as many devices as they do. But we don’t want to be like them — we want to be like us and make the best devices.”

Sales rocket in 2010

This brand of doing business has allowed Apple to build the most loyal and fanatical group of followers, capturing more and more market share every step of the way.

As a result, its sales continue to out-pace analyst’s expectations…

Apple’s fourth quarter net income rose 47 percent to $1.67 billion (or $1.82 a share) as Apps, iTunes, iPhones, iPods and everything in between continued to fly off the shelves. Meanwhile, sales rose 25 percent to $9.87 billion as the back-to-school season wound down.

In all, Apple sold 7.4 million iPhones, 3.1 million Macs, and 10.2 million iPods as the quarter came to a close.

And after a strong back-to-school season, it will be interesting to see how Apple performs over the holidays. Judging from what went on under my Christmas tree this year, here’s a bet they just keep chugging along.

It makes me wonder why I wasn’t smart enough to buy my first shares of Apple when I bought my first Apple computer in 1992. Since then, shares of AAPL are up over 4500%.

Despite their incredible run, Apple seems poised to head higher still. With a forward P/E ratio of 14.45, a PEG ratio of 0.85, and a growing pile of cash, you can make the case that Apple is undervalued — even at $325 a share.

The big question is whether or not the company can keep up this torrid pace into 2011 and beyond.

In that regard, we will know a lot more about Apple’s sales when the company releases its Q1 earnings report on January 18th. Judging just from the traffic I saw at my local Apple store, it should be another terrific quarter…

That being said, the choice was an easy one. Apple Inc. is definitely the Stock of the Year.

As for 2011, I think it will be tough for Apple to hold onto the top spot…

I’m willing to bet commodity investments will be among the biggest winners as we turn the page a year from now.

Your bargain-hunting analyst,

steve sig

Steve Christ
Editor, Wealth Daily