Yoshikami: Apple & Dell — A Tale of Two Stocks

In this difficult investment environment, it's a daunting task to choose which stocks to invest in. But there are some basic strategies that can help investors make the right selection even in these times.

When investing in stocks, it's important to look at the challenges companies face as they attempt to execute a business strategy. I call these headwinds and tailwinds.

Tailwinds include products and services at the forefront of an emerging trend, absence of significant challenges in cost structures, and intellectual property that allows a company to
charge a premium.

Headwinds are anything that create challenges as a company attempts to execute it's business plan.

Michael Dell has done an admirable job in attempting to turn Dell around. Still, the company faces significant challenges. Dell was founded on cost-effectiveness and a direct to consumer/business model. With the emergence of HP as a low-cost competitor that model is under pressure.

Computers are becoming a commodity assets. International competitors such as Lenovo are providing stiff competition and the consumer market does not seem to see Dell as a brand worth paying a premium for. Serious headwinds for Dell are making the going tough.

On the other hand, Apple is at the forefront of a new growing market — portable computing. The iPhone is not merely a cell phone but instead a platform device for a new operating system. Apple's brand is respected by consumers and they seem to be willing to pay a premium for Apple products, even in these difficult times.

It also appears as if there is a pipeline of products that could very well continue the company's success. And they have just begun to tap the corporate market. Tailwinds for Apple to be sure.

Buying assets at the right price is key, so look carefully at valuations before investing capital. But looking at the thematic trends (headwinds and tailwinds) is an important strategic step as you invest capital. Two great brands but two very different investment stories.

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Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at [e-mail].