Repeat After Me, APPLE Is Not A Tech Stock
Zico has a few tricks up his sleeve – his Dirty Dozen stocks, for he is not a believer of diversified portfolio management and, the latest one he is sharing with me, his Global Trinity of Mega Caps.
He was actually talking aloud to himself and I seized on this trinity concept which was new to me. His trinity of names are AAG or AAA.
Apple, Amgen, Amazon
or Apple, Amgen, Google
He needed this trinity because he is switching out of the Dirty Dozen as he feels that valuations are a tad whimsical but he will probably keep a bit of Tencent. The trinity idea came about as he had to be invested and wanted the best blue chip names he can get and no, banks are not blue chip to him.
Banks – regulatory changes, profit margin squeeze, volatile environments all add up to a dysfunctional investment to him.
He views historical profit and earnings precedence as irrelevant for banks these days and years of pay back to come for the albatrosses, so he calls them.
Global blue chips are good for him as they are liquid and can be considered counter cyclical. But wait a minute, I see 2 tech stocks in both lists only to be chided that Apple and Amazon and Google are not tech stocks as far as Zico is concerned.
Facebook is not a tech stock too, he says. Facebook is a social behaviour stock as is Twitter, there is no tech in them. Tech stocks are the Microsofts, IBMs and Intels, with real technology to sell.
So how does Google and Amazon and Apple fit in ?
Amazon and Google sells consumer services and Google has its fingers in many pies, amongst other things, advertising and hardware from its Motorola arm. They are quite a conglomerate that is ingrained into the economy. Amazon, to him, functions as a utility company in the growing internet retail business that is fast overtaking traditional shopping.
Apple then is a Consumer Stock. Buying an Apple product is like buying a fridge and other consumer electronics. A household necessity and quite un-substitutable.
I was half sold and decided to dig out the global mega caps to see what my alternatives were.
It looks like Amgen is not on the list and Amazon is larger than Citibank.
But the choices aren’t many if you strip out the financials. The GEs and Nestles are not in positions to grow much whilst the commodity firms are way are cyclical.
One thing stands out head and shoulders above all is that Apple has indeed become a way of life for the past decade, much like Coca Cola but can it be a Kodak ?
In an era where people have just begun sleep with their mobile devices, I say we have a long way to go and even with a government shutdown, it does not really impact the decision to buy that new I-phone or I-pad.
My Apple trade went well in Sept and Apple did cross USD 530 last night before closing lower at USD 516.
USD 500 seems like a good support for now. With the S&P perched on a new high, it all the more makes sense to seek some safety under the wings of the Global Trinity.
Levels I am setting for myself with a 12 month time horizon but subject to change depending on market reaction to the US taper which is now expected in 2Q14.
Apple Current Price 516.678
Entry Price USD 500, accumulate at 450.
Target Price USD 560-600
Amgen Current Price 118.269
Entry Price USD 106 – 112, acccumulate at 95.
Target Price USD 140
Google Current Price 1036.24
Entry Price USD 850-900
Amazon Current Price 362.70
Entry Price USD 280-310
As for Amazon, Amgen and Google, I will take Amgen