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Biggest Tech Stock Apple Still a Value: Einhorn, Investors

Tuesday, 20 Jul 2010 | 11:44 AM ET

After climbing more than five-fold in five years to become the largest technology stock in the world, Apple is finding some unlikely buyers: value investors.

David Einhorn, the hedge fund manager with an eye for undervalued buys and overvalued shorts (see Lehman Brothers), bought Apple in the second quarter. The president of Greenlight Capital cited Apple’s $40 per share in cash, which when backed out of the share price gives it a price-earnings ratio of around 15.

“The opportunity to invest in this leading company (with a better financial profile than market participants seem to acknowledge) appears 'iTtractive' at its current multiple,” wrote Einhorn in his quarterly letter to investors in his funds. “While growth over the next few years will certainly be slower than it has been over the last few years, Apple does not appear to have fully penetrated its market opportunities.”

If you look at future estimated earnings, Apple gets even cheaper.

Net of cash, the stock trades for 13 times the 2011 earnings estimate from BGC’s Colin Gillis, who rates the shares ‘outperform’. Gillis cited the new iPad category, along with upcoming strong educational and holiday sales, for his buy recommendation. The analyst also thinks the company may have yet another device up its sleeve: an iPod with the video chat feature from the more expensive iPhone 4.

Apple shares are down more than 10 percent in the last month leading up to today’s reports on concern trouble with the iPhone 4’s antenna will lead to market share gains running Google’s Android software. Investors are also concerned the same fate may befall Apple as its predecessor as largest technology company in the world, Microsoft, whose stock is little changed over the last five years.

“It’s still attractive when compared to other tech/retail stocks like Amazon” said Karen Finerman, President of Metropolitan Capital Advisors and a ‘Fast Money’ trader. “And it’s attracting a new class of investors.” Amazon trades at 38 times forward 12-month earnings.

The juggernaut is also a top holding of John Griffin’s Blue Ridge Capital, Finerman points out. Griffin was previously an investor for Julian Robertson’s Tiger Management.

Apple’s market value is $223 billion, putting it just behind $275 billion market cap of Exxon Mobil, the largest publicly traded company in the world.

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

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Trader disclosure: On July 20, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Terranova owns (EMC), (CREE), (CRCM), (LRCX), (COP), (AXP), (BMO), (CSX), (PEP), (CVS), (GS), (PCP), (C), (APA), (FCX), (JOYG), (MMM), (MOS), (GLD), (UAUA), (WYNN), (GOOG), (BBY), (SU), (KOL); Kelly owns (BP) puts; Kelly is short (GS); Cortes is short the US$; Cortes is short the S&P 500; Cortes is long Crude Oil; Cortes owns (GS); Cortes is short (BAC); Grasso owns (ASTM), (ABK), (BAC), (BA), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST); Finerman owns (AAPL); Finerman’s firm owns (BAC); Finerman owns (C); Finerman owns (BAC) & (BAC) preferred; Finerman owns (JPM); Finerman’s firm owns (JPM); Finerman’s firm owns (MCD); Finerman’s firm owns (WMT); Pete Najarian owns (AAPL) call spreads; Pete Najarian owns (C) call spreads; Pete Najarian owns (GS) call spreads; Pete Najarian owns (LOW) call spreads; Pete Najarian owns (TCK) call spreads; Pete Najarian owns (PFG) call spreads; Pete Najarian owns (TEVA) call spreads; Pete Najarian owns (CNI) call spreads; Pete Najarian owns (GNW) call spreads; Pete Najarian owns (V) call spreads

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