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Apple (NYSE: AAPL) just keeps on chugging. In the midst of co-founder Steve Wozniak recently predicting an eventual $1000 share price ( http://www.cnbc.com/id/46586012), the stock has hit an all-time high in this weeks markets in the $544 range. Yet it is still undervalued. Projecting growth even with an modest EPS estimate of 50, accounting for a P/E ratio of 15, we get a projected share price of around ~$750.00 – and that’s without factoring in any new innovations or devices. Speaking of, let’s take a look at what is coming up from Apple in this year alone:

-The recent predicted press release of the iPad 3 on March 7th (Quad-core processor, 4G LTE connectivity, retina display)

-A rumored price drop (into the $349-399 range) for a new 8GB iPad 2 (http://www.digitimes.com/news/a20120229PD215.html)

-A rumored 7.85inch iPad in the $249-299 range to compete with the Kindle (http://www.digitimes.com/news/a20120229PD220.html)

-Apple TV launch in Q3-Q4 2012

Now let’s think about China, the world’s fastest growing economy. What have you heard about Apple (the worlds largest by market cap, and one of the world’s fastest growing and most profitable companies) in the same sentence with China? I’m willing to bet very little compared to other Apple news. Let’s examine.

The reality is that Apple has barely tapped the Chinese market, which could be it’s most profitable by far.  True, Apple has only 5 stores in China, but with China just now breaking the 1 billion mark on mobile phone subscriptions, it would be foolish not to follow through on it’s 2011 plan of 25 stores on the mainland. With Apple’s own claims that the Chinese stores are the most profitable per square foot than any other in the world, as well as the fierce brand loyalty which encompasses the Chinese culture, Apple really needs to step up it’s distribution and consumer supply strategies before Android squeezes them out of the market.

One of the biggest common criticisms of Steve Job’s command of Apple was that he was always too focused on the United States. Regardless, Apple will only get stronger. The business model that Apple employs is precipitous to continued growth because of the inherent infrastructure in Apple devices. Everything Apple does contributes to and evolves in one giant sphere of products and interactions. It really is quite brilliant. It makes logical sense that the higher Apple’s stock climbs, the more bearish investors will be, but bottom line is that 1k/share could be a serious reality by  Q1-Q2 next year depending on how well China grabs and holds on to Apple – or I should say, how well Apple takes advantage of the wealth of opportunity in China.  a

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

No doubt some of you have noticed the crazy internet reaction to the SOPA/PIPA intellectual property and copyright acts that are making their way through the House of Representitives at the moment. Well, we here at Leading Financial Management Group are always looking ahead and preparing for the future, so let’s take a quick snapshot of 3 stocks that could be positively affected from the precedent that would be set by the government’s censorship of the internet.

Streaming Services-

Netflix (NASDAQ: NFLX) would be in a very interesting situation should internet piracy receive a massive crackdown. The same can be said about Hulu and Spotify. Intuition says that internet streaming companies – who provide “free” content being paid for by ads – would receive a massive influx of traffic from internet users who can no longer download everything media related.  Netflix’s stock has been trading under $100 since the 2nd half of this year, after it’s disastrous pricing plan experiment dropped it’s stock by about 70%.  @ $100, this could be a serious bargain considering it’s 52-week high is over $300 when it was still sharing the world with internet piracy. Pandora, which also is trading relatively lowly (under $15/share) could also potentially see a spike in activity due to new ears looking for music. As for Hulu and the realitively new Spotify, neither of these are publicly traded yet (although Hulu was rumored to have considered it in 2010).  If you have a bearish outlook on these bills and consider the mostly popular opinion to prevail, longing Netflix and Pandora (even though your upside might be lower) and watching for new streaming-content company IPOs might still be advantageous.

Big Media Distribution Companies -

Sony (NYSE: SNE) has had it’s share of  problems with hackers on the Playstation network (who got access to over 70million subscribers’ personal information) and increased scrutiny for their principles of conduct associated with their products. It also had a sub-par 2011. Revenues are down, and many questions (Sony’s tech in apple products, the success of the Playstation Vita in the handheld market, iPad/iPhone gaming’s effect on the console market, the emergence of crystal LED technology, among others) are floating around in current and future investor’s minds. Sony is the parent company of Sony Music Entertainment, Sony Pictures Entertainment, Sony Computer Entertainment, as well as other smaller branches. With Sony struggling to post profits in recent years and a 52 week high of $36.97 (less than half of what it’s trading at now), a massive crackdown on internet piracy and illegal duplicating of digital property could massively boost Sony’s earnings AND it’s stock valuation.

Also, watch out for the French media giant Vivendi (NYSE: VIV). Vivendi owns Universal Music Group, and has a controlling stake in Activision Blizzard, the largest video game company on the planet right now. Interestingly, the company’s profit was up in 2011 despite economic crisis in Europe. SOPA/PIPA legislature would create bullish outlooks for these two companies, where longing Sony and Vivendi would make sense. On the flipside of that coin, if SOPA/PIPA/something like it doesn’t go through, expect a flood of shorts on Sony as the economic uncertainty and ease of newer technology drags share prices south.

Happy trading!

Disclaimer:  Leading Financial Management Group does not recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Past performance does not guarantee a future profit. 

First of all, a Merry Christmas and happy holidays to all. We here at LMFG.info have been busy enjoying our holidays and we hope you have too. With that being said, let’s finish where we started in our last post.

There’s an old saying in business ~ an asset is only worth what the next person is ready to pay for it. In real estate, the principle method of valuation is comparative valuation. Appraisers look at the surrounding neighborhoods and features along with the different elements that constitute the home to deduce a reasonable sum in which the buyer or seller can utilize based on these aspects combined with the market perfomance in the region.

The point here is that investors can use this same method to compare and contrast stocks in a particular market. This is called relative valuation. A stock is simply a share of a business, so the theory goes if the investor can utilize the fundamentals of a similar business “B”, they can therefor understand the valuation of a business “A”. For example, we can use tools we’ve already discussed (PEG ratio, debt/equity analysis) to analyze two companies that have similar business models, price points, and who pull from the same customer base. A good example of this might be Walmart and Target.

A good thing to keep in mind is that the ratios mentioned earlier all work well together to give the investor a good snapshot of the stock, but every valuation technique has it’s limitations. Calculate and choose wisely. Happy hunting!

Having to balance many responsibilities and time constraints in today’s world is a given, and many times we do not have time to simply do all of the “leg work” that is entailed in making a fully realized, comfortable investment decesion. This is why financial advisers exist, among other reasons. Here are a few good metrics I like to analyze to get a quick snapshot of a company I am considering investing in:

Since I am an investor first, I like to consider valuation first. Valuation is simply a way to understand what investors are willing to pay for a business at a given time.

Price/Earnings to Growth ratio (PEG)

The price-to-earnings ratio is simple. It takes the earnings of the company (profits, COGS, rents, salaries/wages payed etc) and divides it by the price per share (market value) the stock is selling for. This ratio is generally used to tell how under or over-valued a stock is, and higher P/E ratios are usually found in “growth” stocks. Because there are other factors to consider when examining growth (such as strength of brand name, quality of employees, market pressures and investor forcast), a wise way to use P/E is to combined it with the Annual EPS (earnings-per-share) growth by dividing P/E over annual EPS.

This gives you a ratio that does a better job predicting future growth of a company than the P/E ratio, which is based on past earnings and figures. Let’s say you want to invest in a semiconductor company that has a P/E ratio of 60, with an annual earnings growth rate at a relatively low 10. You would end up with 60/10=6. Compare this with a food services company that has a smaller P/E ratio of 20, with a relatively low earnings growth rate of 10 – 20/10 = 2.  The conclusion could be that the tech company is overvalued for its price.

This simple model is called the Price/Earnings to Growth ratio.

The PEG is a relatively basic ratio that combines factors of growth AND valuation. Another important aspect of appraising future investments is accounting for financial stability. It is important to know that a company has a strong balance sheet, which can be an indicator of responsible management, lower risk for investors and a future indicator of growth and expansion opportunity.

The Debt-Equity Ratio (D/E)

I like this ratio, because although it does account for operational liability (which isn’t true debt), it also is a nice quick way to snapshot a companies’ leverage by taking total debt and dividing it by shareholders equity. This, in effect, is showing how much lenders, creditors and suppliers have commited to the company, compared to the shareholders.

Let’s take Company A, that has a balance sheet total debt of 5,000, and a total shareholder equity of 10,000. Our ratio would be 5,000/10,000, or %50. Generally speaking, I like to find companies with under 100% D/E ratio, the smaller the better generally.

Also keep in mind that, depending on the market and industry, it is important to expect and substantial amount of debt with larger companies, possibly increasing due to capital expenses increasing. This should not be deterring, and infact can be an indicator of increased growth and expansion. However, it is important to have the shareholder confidence to reflect this.

more to come…

Been following the commodities markets? Well here are some names worth monitoring:

Titanium Dioxide, DuPont (NYSE: DD) and Kronos Worldwide (NYSE: KRO)

TiOH2 price has shot up some 38% this year, and the compound known as rutile (which is 95% TiOH2) is up 77% this year, and the forecast to go another 62% next year. Why? Because this pigment used in plastics and paints is being gobbled up by developing countries and where infrastructure and industrial growth has been blossoming. However, it’s supply is not projected to increase for another 3-4 years (we’ve mined almost all of what we can find right now)

DuPont’s 3rd quarter volumes we’re 1% lower, but revenue was up 32%. Kronos Worldwide’s volume was also down 1%, yet saw an incredible 47% increase in revenue from a year ago. This increased it’s new income to 85.9 million from 32.1 a year ago.

Oh, and this company also pays out a dividend yield of 2.7% (!). Watch Kronos and see how it handles it’s pricing vs. shrinking supply dilemma.

Disclaimer: We do not see this a strong investment, simply analyzing what effect the reduce supply of materials will do the stock price.  DD, has had a decrease in net income over the past 2 Quarters this year, and we do NOT have confidence that it will make a solid return.

In the previous post, I discussed the benefits of a passive investing strategy known as dollar-cost averaging. Like any investing plan however, it has a risk/return profile – and sometimes, it may not benefit.

The first thing that should be understood is that this is NOT a short-term strategy. If you are a day-trader who focuses on making a maximum profit in a minimum amount of time with a very active, high risk investment outlook ( and generally alot of time on your hands to monitor and adjust accordingly), you should look elsewhere then DCA.

Another problem emerges when investing periodically in a bear market that lasts longer than anticipated (for example, I’m willing to bet many DCA’ers got a lot more than they bargained for and bailed out in a panic after an unsympathetic dotcom 2003-ish bear market.) Investing in a perceived market floor, only for the market to continue downward deems DCA advantages useless because they depend on a eventual market upswing. As a general rule of thumb, dollar-cost averaging tends to reduce risk which seems to come at the expense of returns.

The bottom line is that DCA is not for everyone. It favors a more passive investor, and although the periodic investing of small sums can help to guarantee a lower overall dollar-per-share purchase in the long run, you as the investor must be savvy enough to manage and monitor your hopefully-diversified portfolio in order to be aware of inherent market risk.