Trade Alert – P/E ratio comparisons and time horizons

The Apple apathy apparently arises absolutely all of the time. Here’s your Trader’s Thought of the Day for today.

Compare the following trailing twelve month P/E ratios, which don’t even account for the huge amount of cash (Apple, Google, Microsoft) or the huge amount of debt (IBM, HPQ, Comcast):

• Apple – 9
• IBM – 14
• Google – 25
• Hewlett-Packard – 7
• Comcast – 17
• Caterpillar – 11
• GE – 18
• Microsoft – 15
• Dollar Tree – 17
• Goldman Sachs – 11
• Cisco – 12
• FutureFuel – 14

The only two stocks on that list trading for less than 10x earnings is a company that’s gone through numerous CEOs, written down tens of billions in horrible acquisitions, hasn’t generated GAAP earnings in who knows how long and sells completely undifferentiated, commoditized products. The other one is growing faster than any other mega-cap company in the entire world, has a built-in, locked-in customer base of more than 100 million customers, has a revolutionary new, easiest-to-use eco-system that is adding to its already unheard-of critical mass, and has lots of new revenue categories such as television content delivery, wearable computing, and talking interactivity, and is expected to report more profits in one quarter this year than any company has ever done in history.

I’m not going to sit here and defend Apple endlessly, and like the rest of you guys, I really don’t know when or what will make Apple’s stock turn up and sustainably rally again. But when these weakhanded shareholders and shorts and daytraders and bears get done selling and shorting all the Apple stock they can, Apple’s very likely to be much, much higher soon thereafter, as both earnings and the multiple are likely to rise by the end of this year. Which means if your time horizon is more than six months, then Apple is indeed a name you want to be in while it’s hated and apathied and loathed and ignored.

Meanwhile, Marvell continues its steady ascent and we’ve now got more than a double in the calls we bought a few weeks ago in that name. I’m still holding those steady for now. And I’m going to go ahead and buy another small tranche of FutureFuel, just about building up that position to the size I want it to be for me.