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November 29, 2010
Consumers Take Another Bite
AAPL, $AAPL, Apple Inc. Ready to Fly?
The best attempts of the marketing folks have re-branded today "Cyber
Monday." The online counterpart to "Black Friday," "Cyber Monday" is the day for
online sales of hot items from retailers with a big online presence such as Target, Wal
Mart, Best Buy, etc. These sorts of retailers are often the "go to" outlets for gadgets and
the season's hottest games, game systems, cell phones, etc.
Of course, the hottest gadgets of late come from one place, Apple Inc. Apple
has been riding a huge wave of success based on holiday season must haves such as
the iPod, the iPhone, and now, the iPad. According to today's WSJ, analysts see
strong demand for Apple products so far this holiday season.
Our models always have a tough time with Apple because it is so very hard to
quantify the love and devotion engendered by its products. Qualitative factors are
tough to factor into our models. As of today, ValuEngine has issued a HOLD
recommendation for Apple. Based on the information we have gathered and our
resulting research, we feel that Apple has the probability to ROUGHLY MATCH
average market performance for the next year. The company exhibits ATTRACTIVE
company size and risk, but UNATTRACTIVE market/book ratio and price/sales ratio.
Based on available data as of Nov. 29, 2010, we believe that AAPL should be
trading at $313.82. This makes AAPL 0.38% overvalued. Fair Value indicates what we
believe the stock should be trading at today if the stock market were perfectly
efficient and everything traded at its true worth. For AAPL, we base this on actual
earnings per share (EPS) for the previous four quarters of $15.66, forecasted EPS for the
next four quarters of $19.00, and correlations to the 30- year Treasury bond yield of
4.21%.
If we look at the broader quality rating provided by the composite score, we
find that it is much more attractive. The composite rating includes short-term forecast,
p/e ration, market cap, valuation, and momentum (LTM return.) Using this measure,
we find that Apple is ranked in the top 4% of universe of more than 5000 equities,
ADRs, and foreign stocks that trade on US exchanges.
Editor's Note--in the interest of full disclosure it must be noted that the writer has a 32gig iPod touch on
his Amazon wish list!

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MARKET OVERVIEW
Summary of VE Stock Universe
Stocks Undervalued 48.29%
Stocks Overvalued 51.71%
Stocks Undervalued by 20% 22.48%
Stocks Overvalued by 20% 21.81%

SECTOR OVERVIEW
Sector Change MTD YTD Valuation Last 12- P/E
MReturn Ratio
Aerospace -0.74% 0.03% 17.62% 1.70% overvalued 26.14% 19.34
Auto-Tires-Trucks -0.25% 4.47% 42.46% 6.08% overvalued 47.92% 34.59
Basic Materials -0.98% 2.90% 23.12% 19.16% overvalued 57.70% 33.81
Business Services -0.39% 3.32% 8.29% 0.06% undervalued 19.59% 29.51
Computer and Technology -0.16% 3.38% 23.82% 1.29% overvalued 32.67% 40.49
Construction -1.05% 2.73% 1.45% 6.70% undervalued 4.73% 37.48
Consumer Discretionary -0.45% 3.38% 19.05% 1.44% undervalued 26.73% 30.59
Consumer Staples -0.29% 2.95% 7.34% 2.14% overvalued 16.22% 22
Finance -0.54% 0.23% 13.44% 0.42% overvalued 14.16% 29.56
Industrial Products -0.30% 3.83% 17.04% 3.67% overvalued 26.60% 27.33
Medical -0.37% 2.20% 11.47% 7.46% undervalued 16.32% 33.5
Multi-Sector Conglomerates -0.76% 2.92% 18.90% 8.59% overvalued 29.66% 32.66
Oils-Energy -0.65% 5.71% 12.39% 18.47% overvalued 40.56% 43.02
Retail-Wholesale -0.11% 5.12% 17.04% 4.60% overvalued 54.41% 25.98
Transportation -0.67% 1.71% 20.29% 4.87% overvalued 27.00% 39.48
Utilities -0.73% 0.20% 4.76% 2.67% overvalued 14.90% 27.37