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], Google[GOOG
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], Research in Motion [RIMM
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] and Amazon [AMZN
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]. Seems counter-intuitive to believe that last year's highest high-flyers that all suffered precipitous declines with the ongoing craziness on Wall Street would be a good place to park some cash, especially since all four have enjoyed marked improvements from those lows 52-week lows earlier this year.
Take a look at each, and you'll see some significant ground gained these past few months: Apple is up more than 60 percent since March; Google up better than 25 percent since then; Research in Motion up more than 70 percent since February; Amazon almost 40 percent. Sharp moves to the upside that might embolden the shorts into believing these jumps were too much too fast, and that all four are poised for a big-time plunge back down to earth.
I would argue the other way, especially if you take into account fundamentals. I've never been one to fan the flames of "momentum trading" and I'm certainly not espousing the idea now. Instead, looking at fundamentals of all four of these players and investors can't help but see optimistic trends that will likely build on the gains recently, rather than indicate that those gains have peaked.
In other words, it's not that fundamentals dragged these companies lower and the action lately has merely been a recovery rally. Investors in all of these companies may be realizing that indeed fundamentals are strong, and that there's still a lot of room to grow from here.
I've detailed extensively the opportunities in Apple, thanks to ever increasing consumer and enterprise interest in the iPhone. Seems a bunch of analysts have upped their iPhone sales expectations not just for 2008, but next year too. That its adoption is seeping its way into business users as well, and that the device could become an electronic Trojan horse that works its way into the enterprise, and then exposes corporate IT buyers to the wonders of Apple and encourages them to shift to Macs next, instead of merely the next generation of PCs from Dell [DELL
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] and HP [HPQ
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]. That the Apple model is far more than merely iPhone -- which is on the verge of blockbuster status -- but Mac, iPod, iTunes, digital entertainment and retail as well. It's an amazing model.
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At Google, another amazing model: it owns search. And thanks to the questionable partnership with rival Yahoo, and Microsoft's [MSFT
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] inability to come up with an online strategy of its own, Google has no competition. And this is arguably the biggest growth sector in all of technology. And Google knows what it's doing in the space. An incredibly effective management team, in a sector enjoying uber-growth, and no competition.
Not to mention the enormous potential Google sees with the other side of the search coin: display advertising, as detailed in a new report out today from Citigroup's Mark Mahaney. Its deal with DoubleClick will mean significant dividends, and soon. That's not to say Facebook, or MySpace, or LinkedIn or someone totally off the radar won't come up with a challenge, but Google has such an enormous head start, it's unlikely anyone will come up with anything meaningful. Google's in a good place, indeed.
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Research in Motion faces competition from Apple, but isn't sitting still. Jack Black in "Kung Fu Panda" warns, "Get ready to feel the thunder!" That could be the battlefield cry for RIM as it gets ready to release its next generation Blackberry touch screen device. But the smart phone market is so new and the growth opportunities so huge, that there's more than enough room for two, very big, very successful players. Sure, Nokia [NOK
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] and Samsung are lurking. But BlackBerry is the juggernaut, the company continues to innovate, and it doesn't seem there's a real threat out there. The company reports earnings next Wednesday so we'll get a better idea then.
And Amazon! I've been skeptical about Amazon for some time, having trouble understanding a market cap and multiple so high for a company whose profit margins are so low. But in this economy, what had been perceived as Amazon's weaknesses way back when against eBay [EBAY
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], are now squarely its strengths: a pack and ship model second to none, and not a patchwork of millions of mom-and-pop independent retailers offering goods, but a brand name network of top goods providers offering compelling deals. Dan Niles at Neuberger Berman called eBay a kind of online version of Wal-Mart [WMT
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] on our air yesterday. I'd argue that the comparison between Wal-Mart and Amazon works much better.
Go with what you know, the old saying goes. Investors know these four companies very well, and ought to know that their fundamentals could take them very far indeed.
Questions? Comments?
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