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.
Showing posts with label technology. Show all posts
Showing posts with label technology. Show all posts
Tuesday, October 25, 2011
Monday, August 8, 2011
Dolby's Sound Gets a Bit Muffled
My father always liked investing in top-notch audio and video gear. In the early 1980s, he laid down $400 for a VCR. That's about $1,100 in today's money. And that was on a pressman's salary.
When I think back to that audio and video gear, I can remember the words "Dolby Sound" appearing on quite a few of them.
It was a mark of quality, regardless of brand or device type.
Over the years, Dolby (DLB) has figured out how to get its technology into just about everything -- cassette decks, CD players, movies, home theater systems ... You name it.
That's why I was willing to give the company a shot after two weak quarters sent its stock price tumbling from a high near $70 to just over $40.
The underlying concern with the company was less about what it was earning right now, and more about what it might be earning in the future. Dolby made a lot of money on PCs. Its technology was built in to operating system and optical drives.
The transition from desktops and laptops to smartphones and tablets presents the company with a new challenge.
Buying the stock this spring was a vote of confidence in Dolby. I believed its technology was still seen as a necessity by most quality tech makers, and that because of that, Dolby would navigate its way through yet another technological change.
And then the curveball
That confidence was shaken last week when the company dropped a shocker on investors during its conference call. It revealed that it's not in the current version of Windows 8 that's still in development. It had long been included in the previous Windows versions.
Wall Street took notice. There were immediate downgrades. The stock, already down over the past few months, plummeted another 18%.
So what's an individual Dolby investor to think?
On one hand, Windows 8 will represent only a small piece of Dolby's market. And there's a chance Dolby sound will be included on the final version, which is the only one that counts. The company is also working with equipment manufacturers to get the technology directly on the computers and other gadgets.
So, this may be much ado about nothing, and since Dolby's full quarter actually beat analysts' expectations, maybe things are not looking bad. Maybe, at a price-to-earnings ratio under 12, Dolby is a screaming buy.
On the other hand, the fact that Microsoft (MSFT) has not included Dolby on the operating system so far raises a big question: Do tech makers still consider Dolby necessary to their products?
If not, the company has much more to overcome than I'd previously bargained for.
Where to go from here?
This has left me at a crossroads with the stock.
I have four options:
I'll be thinking more and watching the price movements and news over the next few days to help me decide.
What would you do?
See my portfolio here.
When I think back to that audio and video gear, I can remember the words "Dolby Sound" appearing on quite a few of them.
It was a mark of quality, regardless of brand or device type.
Over the years, Dolby (DLB) has figured out how to get its technology into just about everything -- cassette decks, CD players, movies, home theater systems ... You name it.
That's why I was willing to give the company a shot after two weak quarters sent its stock price tumbling from a high near $70 to just over $40.
The underlying concern with the company was less about what it was earning right now, and more about what it might be earning in the future. Dolby made a lot of money on PCs. Its technology was built in to operating system and optical drives.
The transition from desktops and laptops to smartphones and tablets presents the company with a new challenge.
Buying the stock this spring was a vote of confidence in Dolby. I believed its technology was still seen as a necessity by most quality tech makers, and that because of that, Dolby would navigate its way through yet another technological change.
And then the curveball
That confidence was shaken last week when the company dropped a shocker on investors during its conference call. It revealed that it's not in the current version of Windows 8 that's still in development. It had long been included in the previous Windows versions.
Wall Street took notice. There were immediate downgrades. The stock, already down over the past few months, plummeted another 18%.
So what's an individual Dolby investor to think?
On one hand, Windows 8 will represent only a small piece of Dolby's market. And there's a chance Dolby sound will be included on the final version, which is the only one that counts. The company is also working with equipment manufacturers to get the technology directly on the computers and other gadgets.
So, this may be much ado about nothing, and since Dolby's full quarter actually beat analysts' expectations, maybe things are not looking bad. Maybe, at a price-to-earnings ratio under 12, Dolby is a screaming buy.
On the other hand, the fact that Microsoft (MSFT) has not included Dolby on the operating system so far raises a big question: Do tech makers still consider Dolby necessary to their products?
If not, the company has much more to overcome than I'd previously bargained for.
Where to go from here?
This has left me at a crossroads with the stock.
I have four options:
- Sell at a 33% loss and look for better opportunities.
- Sell out of part of my position, but still give DLB a chance.
- Stand pat and don't overreact to what might turn out to be non-news when all's said and done.
- Treat the plunge as an overreaction and buy more DLB.
I'll be thinking more and watching the price movements and news over the next few days to help me decide.
What would you do?
See my portfolio here.
Sunday, July 24, 2011
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?
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?
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