The Apple of my i-Phone

Don’t you just love the way the media spins headlines. I especially get a Chuck-le out of how they attribute a piece of news to being the cause of what the markets are doing. Today excellent earnings results by Apple, Inc. were given credit for markets rising all over the world. How do they know that? Who tells these writers this and how is it determined? The answer is nobody. Unrelated announcements are merely matched together and a cause effect relationship is fabricated.

The Apple headline was early this morning, but was soon trumped around 10:00 a.m. by the following: Associated Press headline. Stocks fall on weak home sales report. Yet as I am writing this post, Apple’s stock (AAPL) is up over 3%, eBay (EBAY) is up 9% and NII Holdings (NIHD) is up over 12%. To me it seems like good businesses have minds of their own. It is so important to remember that it is a market of stocks (individual businesses) not a stock market. Personally, I don’t believe in investing in the stock market. I like to own good companies whose management I trust and whose prices (valuations) make sense. Today’s FRAT™ Videx™ will compare AAPL, EBAY and NIHD on valuation and future growth potential!

FRAT™ VidEx™ (click to open in full screen)

The author manages portfolios owning NIHD and EBay.

One of the most important questions a prudent investor must ask is: What value am I getting for the price I have to pay? Always remember that the price is what you pay, but the value is what you get. Today we looked at three excellent businesses where each are expected to grow at comparable 15% rates. Yet we are asked to pay significantly different valuations for the same potential results. WHY?

More precisely why would I value a dollar’s worth of Apple’s earnings twice as much as I do eBay’s. If I took these dollars to the store, could I buy twice as much merchandise with Apple’s dollar than I could with eBay’s? Of course not, both dollars would buy the same. Then why pay a different price to buy one over the other. Makes no sense to me, how about you?