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Company name KLA-Tencor Corporation
Stock ticker KLAC
Live stock price [stckqut]KLAC[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Fair
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $85.18
Target stock price (averages with growth) $101.9
Target stock price (averages with no growth) $77.07
Target stock price (manual assumptions) $66.4

The following company description is from Google Finance: http://www.google.com/finance?q=klac

KLA-Tencor Corporation (KLA-Tencor) is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor’s offerings include the Chip Manufacturing, Wafer Manufacturing, Reticle Manufacturing, Complementary Metal-Oxide-Semiconductor (CMOS) Image Sensors Manufacturing, Solar Manufacturing, light emitting diode (LED) Manufacturing, Data Storage Media/Head Manufacturing, Microelectromechanical Systems (MEMS) Manufacturing, and General Purpose/Lab Applications. It also provides refurbished KLA-Tencor tools as part of its K-T Certified program for customers manufacturing larger design-rule devices, as well as service and support for its products. The Company’s products are used in a number of other industries, including the LED, data storage and photovoltaic industries, as well as general materials research.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in this stock.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

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CNET recently put out an article discussing the most profitable US corporations. The article shows that even with Apple’s disappointing quarter that caused a major drop in stock price, Apple is still had more income than anyone else. The issue is that the analysts thought that the results were going to be even better, so the analysts were disappointed. When you disappoint analysts, they punish you by saying bad things. I am borrowing the great CNET chart below.

 

Apples disappointing quarter in context chart

 

To this analysis, I would like show how cheap these stocks really are. While I try to not compare the P/E ratio of non-competitors, I think it is valid for this one exercise.

If we look at the P/E and EPS of these companies, it is quite telling how cheap Apple really is among this peer group.

 

Company

Symbol

P/E

EPS

Apple Inc.

AAPL

9.78

44.10

Exxon Mobil Corporation

XOM

9.17

9.69

Microsoft Corporation

MSFT

15.39

1.82

Pfizer Inc.

PFE

22.36

1.26

International Business Machines Corp.

IBM

14.57

14.41

JPMorgan Chase & Co.

JPM

9.64

5.20

Wells Fargo & Co

WFC

10.85

3.36

The Procter & Gamble Company

PG

19.76

3.90

General Electric Company

GE

17.08

1.39

 

It might not be obvious from looking at the above table of values. Looking at P/E as a chart shows that Apple is one of the cheapest stocks by comparing its price to the earnings of the company.

Apple's PE compared to the most profitable companies

 

It really becomes obvious then by looking at the earnings per share in chart format!

Apple's EPS compared to the most profitable companies

 

So if you think that Apple’s days are done, you may want to think again! In fact, the biggest complaint that you can say about Apple is it seems that they are not getting enough shareholder value! 

If you think that IBM is fairly priced for its earnings then it would be realistic that Apple could increase its share price by 50% if you focus on P/E! By looking at Microsoft, you could say that the price could go up 60%! This means that it is likely that Apple has more upside potential than downside risk.

My disclaimer on this site consistently says that I ‘might’ be long any stock I talk about. In this case, I am long on Apple as I write this article. However, as I consistently point out in my book, The Confident Investor, I didn’t pay for those shares! My current Apple holdings are all free.  If you want to know how to get free stock in great companies, I suggest that you read my book. You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.

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Company name J.C. Penney Company, Inc.
Stock ticker JCP
Live stock price [stckqut]JCP[/stckqut]
Confident Investor Rating Poor

The following company description is from Google Finance: http://www.google.com/finance?q=jcp

J. C. Penney Company, Inc. (jcpenney), is a holding company. The Company is a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012. Its business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside jcpenney and home furnishings. As of January 28, 2012, its supply chain network operated 27 facilities at 18 locations, of which nine were owned, with multiple types of distribution activities housed in certain owned locations. Its operating subsidiary is J. C. Penney Corporation, Inc. In November 2011, it completed acquired the worldwide rights for the Liz Claiborne family of trademarks and related intellectual property, as well as the United States and Puerto Rico rights for the Monet trademarks and related intellectual property.
Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in this stock. It is not possible to confidently invest in a company that is not currently profitable.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

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Let’s say you were around on VJ day, September 2, 1945, which was the day that Japan formally surrendered at the end of World War II. For the month of September 1945, the Dow Jones Industrial Average was at $180. Sixty years later in September 2005, the DJIA was $4,789. That is an increase of over 2600% over 60 years.

The problem is that the increase in the DJIA was not a straight line; it went up and down the entire time. If you could not wait for 60 years but only had 40 years, the price in September 1985 was $1,329, which is only a bit better than 700% for the four decades. If you only could wait 20 years, the price in September 1965 was $931, which was a bit better than a 500% increase.

How does this compare to interest earned in a bank? If you put $180 into a bank account and it earns 8.22% compounded daily for 20 years, then you will have about $931 (the same value as the DJIA that year). For 40 years, the $180 invested at 5% would result in your $1,329. The 60 year mark would turn your $180 into $4792 at 5.47%. This shows that the timing of your buying and selling can have a dramatic impact on the return of that investment.

“Buy and hold” may be good, but it does not necessarily mean that the longer you hold your investment, the wealthier you will become! This is due to the erratic nature of the stock market. You need a system that can maximize the return during the peaks and minimize the risk on the valleys. Five to eight percent returns seem quite small, especially for something as high-risk as the stock market.

Five to eight percent returns are probably adequate for a bank, but this is not a safe, FDIC-insured bank. This is a highly-volatile holding that can decline in value quite rapidly. Conservative banks can pay a lower interest rate because the saver can be assured that the rate of return is safe. In the stock market, your only stability comes from your understanding of what is happening to your investment.

You need a system that allows you to evaluate companies, buy into those companies that are good investments, and then transfer that money to other companies when the investment is better elsewhere. That system is described in my book, The Confident Investor. You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in ebook formats for Nook, Kindle, and iPad.

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Company name Meredith Corporation
Stock ticker MDP
Live stock price [stckqut]MDP[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Fair
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $43.45
Target stock price (averages with growth) $50.16
Target stock price (averages with no growth) $37.74
Target stock price (manual assumptions) $40.71

The following company description is from Google Finance: http://www.google.com/finance?q=mdp

Meredith Corporation (Meredith) is a media and marketing company. The Company is engaged in magazine publishing and related brand licensing, television broadcasting, digital and customer relationship marketing, digital and mobile media, and video creation operations. The Company operates two business segments: national media and local media. The national media segment includes magazine publishing, brand licensing, digital and customer relationship marketing, digital and mobile media, database-related activities, and other related operations. The local media segment consists primarily of the operations of network-affiliated television stations, related interactive media operations and video production related operations. In October 2011, Meredith completed its acquisition of Rachael Ray. In January 2012, the Company acquired FamilyFun from Disney Publishing Worldwide. In March 2012, the Company acquired Allrecipes.com, digital food brand.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good, in fact the company ranks as a Good company, but there are some concerns with the price of the stock. Namely the sales of the company are not growing at the rate that make me comfortable. I will not be adding this stock to my Watch List at this time.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.