An Apple Trade in Review

Three months back, I was ruminating about my increasing interest in Apple and wondering whether it was a good idea to own Apple as well as companies that compete with the tech giant.
Ultimately, I decided to put my money on Apple (AAPL) outperforming those companies. I sold off two-thirds of my Adobe (ADBE) shares. I liquidated my position in touchscreen maker Synaptics (SYNA.)
I felt pretty good about it then.
So, how did that play turn out a quarter later?
It was looking pretty smart until last week.
As part of the trade, I had sold my Adobe shares around $25, a hair above my average buy price.
It's since inched up to $28.20. That's about a 13% gain.
Not too shabby.
Synaptics is a much more interesting story.
 I sold off Synaptics at $26, and the stock subsequently lagged for two months. It reached a low of $22, and it looked like investors were about to leave the company for dead.
Then, something turned.
First, the company's new CEO started talking about new growth opportunities.
The stock started to tick higher, up past my sell price.
Then, it reported earnings last week. And it blew up.
The stock is up some 25%.

Tale of the tape
Those are some nice gains, indeed. But, how did Apple do over that time? 
Not bad. But not as well.
I picked up my Apple shares around $370. It closed Monday at $406. That's a hair under a 10% gain.
If I'd made the switches all on that same day, I'd have been up a bit on Apple over Adobe, but still trailing mightily on Synaptics.

The second guess
So, would I have been better off leaving my money where it was? Should I have hedged my tech bets instead of putting all those eggs in one basket with Apple?
I'm not quite ready to pass judgement on that yet.
Apple still looks underpriced to me, with fantastic growth and a price-to-earnings ratio under 15.
But it's an absolute behemoth, and moving that price won't happen as easy as it will for smaller firms like Adobe and Synaptics.
And this comparison has to take into account the first Apple quarter that failed to meet expectations in a long time. I think that will be an anomaly.

The hidden gem
Perhaps my biggest regret in selling off a company like Synaptics to later see a nice run up is that it's a small company I found through my own stock screens and research. It's hard to let those companies go in favor of a "safer bet" like Apple.
I'm going to check back on this trade in three months to see where things stand. But for now, it looks as though the three companies can exist in the same portfolio just fine.


I have not updated my portfolio in a while, but here's a look at my holdings as of September.

My Portfolio August 1, 2011

There are several changes here from my update one month ago. Here's a quick rundown of the moves:

• Bought more Apple after yet another tremendous quarter. That's now my largest holding, even though it was not in my portfolio just four months ago. You can read more about that here.
• In related trades, sold my shares of touch-pad maker Synaptics, and lightened up on Adobe, seeing them as competitors, to varying degrees, of Apple. You can read more about that here. 
• Halved my holdings in Noble, since I bought this deep-water driller several months before the Gulf oil spill and no longer like the growth possibilities in the area, at least not for now. So, I'm expecting slower growth from the company and figure my money can be better invested elsewhere.
• Opened positions in two new companies.

Before I get to my new positions, have a look at the complete portfolio. (For a larger image, click on the portfolio or right-click and open it in a new tab.)




My two new adds are Balchem and Kennametal. I learned about both of these companies through a Motley Fool newsletter service. While I don't buy everything it recommends, I do like these picks. Balchem makes nutrients and other additives for animal feed, drugs, supplements and food we eat.
Kennametal makes industrial tools, like drill bits for mining.
I'll be writing more on what I like about these companies in upcoming blogs.

I also added to my holdings of Dolby, another subject I'll be sharing my thoughts on soon.

Can Apple Co-Exist With Other Tech In a Portfolio?

Apple has fast become one of my largest holdings, and I may look to increase it yet again soon.
The reasons are simple: It records blowout quarter after blowout quarter. It's eating up market share in laptops, desktops and phones and it owns the budding tablet business.
But Apple's success is not without problems for my overall portfolio. There's an iCloud that comes with this silver lining.
I have two companies in my portfolio that compete with Apple to some degree: Adobe Systems and Synaptics.
Adobe, the more familiar name,  is the maker of creative software for professionals and consumers, the purveyors of Flash, and the creators of the ubiquitous PDF.
I have liked this company for a while. Working in the publishing business has shown me how indispensable some of its products are, whether it's Photoshop or InDesign or InCopy. Most publications use all of them, and switching to other platforms --  if possible -- is painful, requiring both a capital outlay and much training.
But Adobe has also landed itself in some nasty feuds with Apple.
The spat over Flash might not be particularly troubling to Adobe's bottom line. Flash makes up only a fraction of a percent of what Adobe earns.
But when Steve Jobs comes out and calls a company "lazy," people take notice. Analysts take notice. Investors take notice.
Is a bet on Apple a bet against Adobe?
I don't think so. While the two may have some overlapping products, each business has its own core. Adobe's is in its creative and business products, such as Photoshop, Illustrator and Reader. I think it can continue to grow with these products and expand their use as the web evolves.

Touchy subject
Synaptics is another story. You may have seen the name somewhere on your laptop. The company is a leader in touchpad technology. It rules the laptop market and indicated last quarter that investors can expect it to do the same in the smartphone market.
The non-iPhone market, at least.
Because Synpaptics is such a big supplier to Apple competitors in these areas, there are some who regard investments in the company as bets against Apple.
I'd owned Synaptics before I'd bought Apple, but this now has me wondering if the two companies can co-exist in my portfolio.
Is a bet on Synaptics really a bet against the growth of Apple, a much larger holding for me? Or is there enough room in the smartphone, tablet and laptop makets for these two companies both to prosper?

Stay tuned
Synaptics will report quarterly results on Thursday. We all know Apple crushed estimates for the same period.  I'll be interested to hear what the company reports and has to say about its future prospects. If I don't like what I hear, I may just flip that money into Apple.


Would you consider having these three tech names in the same 15-stock portfolio?

July 2011 Portfolio

Here's a look at my holdings as of July 1.

The big change over last month was the sale of Timberland, which netted me 73% profit this year (and overall).
I added to my shares of Apple and Berkshire Hathaway, now my second- and fifth-largest holdings.


Breaking out the gain or loss for just 2010 gave me a different view of some of my stocks. I had not realized how far National Presto had pulled back. I'm going to give the company another look this week, with an eye on possibly adding to my holdings.

I might also consider an add to Ford, but it already makes up 14% of my holdings. Not sure if I want to five any one stock that large a piece of my portfolio.

Any thoughts?