The S&P 500 is almost 17% up year-to-date and is now at an all-time nominal high. That said, some very interesting companies are sharply down since 2013 started. While the winners combined to return 28% YTD, the losers averaged -7.67%. Among the laggards, the worst performing stock returned -22%, while the remaining 24 companies lost less than -14% of their value. Let’s review two stocks among the year’s laggards where I think there is value left on the table.
Apple Inc. (NASDAQ:AAPL) looks cheap
The high tech sector changes fast and in furious ways. Companies such as Nokia Corporation (ADR) (NYSE:NOK) and Research In Motion Ltd (NASDAQ:BBRY) have lost most of their value much faster than many thought possible. That said, there is a price for every asset and, by every measure, Apple Inc. (NASDAQ:AAPL) looks cheap. While the S&P 500 has an average P/E multiple of 16 times, Apple Inc. (NASDAQ:AAPL) trades at an ex-cash P/E multiple below 7 times, and the company is still expected to grow year-over-year sales by 8.9% this year. Besides, with a plan to give back $100 billion through dividends and share buybacks (up to $60 billion), there are plenty of reasons to take a deep look at the iPhone and iPad maker.
First of all, there is one huge difference between Nokia Corporation (ADR) (NYSE:NOK), Apple Inc. (NASDAQ:AAPL), and Research In Motion Ltd (NASDAQ:BBRY): Apple has created an ecosystem around its products, iTunes and iCloud. Since iTunes and iCloud exist, Apple Inc. (NASDAQ:AAPL) users get a much better user experience as they increase their use of Apple products. If you have a MacBook laptop, you can share all your products and services with your iPhone, iPad, and iPod. They become fully operative with your life, and they work together in a user-friendly single platform. Besides, once you become an Apple “all product” user, switching back to other platforms (such as Android) is extremely expensive. Moreover, Apple has not lost focus. The company has consistently created high quality products in a single platform and has not diversified itself from its focus: one phone, a few laptop models, and one tablet in two different sizes.
Even if Apple’s competitive situation is not the same as the one faced by the BlackBerry maker, Research In Motion is a great example of how companies with very difficult competitive landscapes can still outperform the market. The BlackBerry maker is up by more than 26% YTD. Even if the chances of the company’s products re-gaining market share against Apple and Android are increasingly diminished, there was a right price to be assigned to the company. It’s true that Research In Motion declined by a greater percentage than Apple did before it started outperforming the market. That said, the iPhone maker is not only still growing sales, but also is not losing market share at the speed that BlackBerry was, and its product base is much wider (from personal computers to the iTunes Store).
Down by almost 17% YTD, and paying a 2.8% cash dividend yield, Apple looks like a good opportunity at current market prices.
Coach, Inc. (NYSE:COH) might be the luxury company to own
The luxury bags maker, Coach, Inc. (NYSE:COH), showed that efforts to stabilize its North America business have been successful, with same store sales in North America up by 1%, according to last quarter’s figures. Moreover, the company is showing very solid margin performance, suggesting that incremental revenue was made at profitable levels. Besides, international markets continue to perform increasingly well, above all in China, where sales went up by 40%, and store comps were up double-digits. Being the cheapest luxury company available in the market, I think Coach, Inc. (NYSE:COH) deserves a thoughtful look. Trading at 15.9 times P/E and expected to grow overall YoY sales by 6%, I am a bull on the name, which is up by less than 7% YTD.