I am uncertain about my Apple Inc. shares because, after some tremendous past increases, they seem to have slowed. I want to know if I should worry.
- R.C., via the Internet
What's in a name? There's plenty at this master seller of consumer technology:
"Computer" has been dropped from its name to indicate its broader scope.
It has resolved a dispute with Beatles' guardian Apple Corps Ltd. and is assured ownership of the Apple name and logo.
A trademark agreement was reached so the "iPhone" name can be used by both Apple and Cisco Systems Inc. Apple's new product combining music and video-playing with wireless phone can therefore co-exist worldwide with the Cisco handset for Internet phone calls.
Shares of Apple (AAPL) are up 10 percent this year after a gain of 18 percent last year. The tremendous earlier increases were 123 percent in 2005 and 201 percent in 2004.
Thanks to sales of iPods, up 50 percent, and Macintosh computers, up 28 percent, Apple earnings increased 78 percent in its fiscal first quarter ended Dec. 30. It has high hopes for iPhone, available through AT&T's Cingular Wireless in June, and a new Apple TV set-top box that sends video from computers to the television.
The consensus rating on Apple from analysts who track its stock is "buy," according to Thomson Financial, consisting of seven "strong buys," 18 "buys" and four "holds."
The most important name at Apple is still chief executive Steve Jobs.
Best-case scenario for investors is that Jobs keeps cranking out hit products for years. When, and if, he decides to relinquish his position, they hope he grooms and elevates a capable CEO but retains an active role as a big-picture guru.
Worst-case scenarios are that Jobs is suddenly no longer at the top, that there is no high-visibility replacement, or that the firm's hot hand of new products cools.
Although Apple has talent besides Jobs, investors would appreciate a speedy resolution of the stock-options investigation of U.S. companies begun last year by the Justice Department and Securities and Exchange Commission.
In December, Apple announced an $84 million after-tax charge for misdating more than 6,400 option grants. It said an internal review found Jobs "was aware or recommended the selection of some favorable grant dates" but that he was unaware of accounting implications. It said he did not benefit financially from any of the grants and cleared him of misconduct.
Earnings are expected to increase 42 percent this fiscal year ending in September, and 17 percent in fiscal 2008, according to Thomson Financial. The five-year annualized growth-rate projection of 20 percent compares with 14 percent expected for the PC industry.
Oakmark Fund was recommended to me. What's your take?
- R.Q., via the Internet
Portfolio managers William Nygren and Kevin Grant, on board since 2000, work hard to learn the ins and outs of every company they invest in.
They're not infallible, having produced a 1 percent decline in 2005, but they do have a lot to offer longer term. Last year, consumer-oriented holdings Harley Davidson Inc. and Kohls Corp. did especially well.
The $5.9 billion Oakmark Fund "I" (OAKMX) gained 14 percent over the past 12 months to rank in the top 10 percent of large growth and value funds. Its five-year annualized return of 6 percent ranks in the top half of its peers.
"The managers are really good and I like this fund as a core holding that doesn't necessarily look or behave like the Standard & Poor's 500 index," said Paul Herbert, an analyst with Morningstar Inc. "However, it may try some people's patience because some years it hasn't performed very well."
Oakmark Fund shifted from mid-caps to larger caps in recent years. It favors stocks trading at discounts to what it considers intrinsic value, but unlike many other value funds has wide-ranging interest in many market sectors. It believes in its holdings and has low turnover, making it tax efficient.
Nygren, who makes final decisions, has worked for adviser Harris Associates for two decades and capably ran Oakmark Select Fund. Grant had been an analyst at the firm. Harris Associates portfolio managers invest a considerable amount of their own money in their funds.
One-fourth of the fund's assets are in consumer services, with consumer goods, financial services and industrial materials other concentrations.
This "no-load" (no sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.05 percent.
Andrew Leckey writes for Tribune Media Services.