WASHINGTON, Dec. 29, 2015 – After last Thursday’s and yesterday’s dismal market action, the Tuesday morning mood on Wall Street is attempting to regain Santa Claus mode in what’s left of 2015 trading. As of the noon hour, the Dow Jones Industrials (DJI) are up 154 points, with the S&P 500 and NASDAQ up 17 and 50 points respectively. All three averages are up nearly 1 percent, which gets 2015 close, once again, to break-even.
It’s been a sad year, all in all, for most investors. Which is what brings us back to our year-end grab back of potential “bounce back” stocks—beaten down stocks in otherwise fine companies or entities. Most if not all of our picks have suffered mightily either from 2015’s economic uncertainties or 2015’s massive, year-end tax loss selling and short-selling panics, which were largely inspired by fear of the Fed and the dismal drop in the price of crude oil worldwide.
Today’s focus is on a pair of beaten up but well-known companies that should come back, at least somewhat, in the early months of 2016.
Apple (symbol AAPL). From a company that, in the late 1980s through about 1999, was widely regarded as a has-been one-shot tech wonder due for an imminent Viking funeral, today’s Apple has turned into a tech behemoth whose valuation is now considerably more substantial than any stock in the DJI. Which, no doubt, is why the stock has fallen victim to a nearly nonstop dump-a-thon throughout 2015.
Why the relentless selling of an American tech company whose margins pretty much any company in the world would love to emulate? We think the answer is fairly simple. First of all, the stock has been “over-owned” since the first iPhones were released, meaning that too many funds and individuals owned so much AAPL stock that it was unbalancing their portfolios. Additionally, professional investors generally get nervous when a single stock takes up too much of their portfolio or portfolios. Hence, they started dumping AAPL big time to lighten up on their holdings in the tech giant.
But another issue has been in play as well—the return of the Apple naysayers. These are, if you’ll forgive us, the same clowns who spent the better part of a decade-and-a-half writing snarky and creative epitaphs for the company that manufactured and sold a has-been personal computer known as the Macintosh.
As we all now know, the Second Coming of Steve Jobs destroyed that myth forever. Even in a depressed personal computer sales environment, the Mac is still selling relatively robustly. The iPhone, current badmouthing of sales figures aside, is still generating massive profits, the iPad has slipped somewhat (as have all tablets) and, perhaps surprisingly, the Apple Watch seems to be gaining some traction.
And apparently, analysts are completely forgetting about the wide-ranging and integrative aspects of Apple’s “CarPlay,” which integrates the iPhone interface and navigational tools with the onscreen displays of an increasing number of auto manufacturers and models—most recently, GM, as pointed out in the Dec. 11 issue of the Wall Street Journal. WSJ writer Mike Ramsay noted that at least one large dealership has noticed an increase in his showroom traffic since the availability of “CarPlay” was announced: “Gavin McGrath, the general manager of Pat McGrath Chevyland in Cedar Rapids, Iowa, has been advertising CarPlay availability and it has drawn in customers.
“‘It certainly has helped us,’ he said. ‘The biggest thing that it has brought to the retail front is…navigation is going to cost $900 [to] $1,000 [as an option]. Here you have Apple CarPlay, and boom your nav is there. That has already helped us close deals.’ CarPlay is a free option loaded into cars with a screen large enough to display the applications.”
Meanwhile, Apple’s gains in music, consumer finance, automobile software and whatever else they have up their sleeves are all being underestimated. Likely, much of this is due to the return of the old, resentful, still snarky crowd of PC-centric analysts who haven’t adjusted to the brave new world of mobile and cloud technologies. Apple remains a leader here, and the future is unknown, except that Apple is providing at least some of the products that will take us there.
And, for all the buzz the Ford-Google linkup is generating in the runup to the 2016 Consumer Electronics Show (CES) in Las Vegas, there’s the small matter of that rumored “iCar” to think about. For better or worse, Apple is one of few companies remaining with a big enough R&D kitty to pull this off.
But the analyst meme, similar to the 1990s “the Mac is Dead” syndrome, trumpets the same old, same old tale that Steve Jobs is dead, Tim Cook is boring and dull, and, well, “Apple is Dead.” Boring and stupid.
Even if Apple earnings “disappoint” somewhat, they’re still likely to be significantly above those of mortal companies in 2016. And so, since the naysayers and click bait analysts have had their say, beating the stock down to around 100 over the past week, maybe it’s time to prove them wrong again and start picking up some shares every time they attack. We picked up a few shares yesterday, and will continue to nibble from time to time. We can be wrong, of course, but for roughly the last 15 years, the “Apple is Dead” crowd has always been wrong.
AbbVie (ABBV). Split off a while back from pharma giant Abbott Labs (ABT), ABBV was once that company’s biotech piece. Now it’s on its own, trading under its new symbol and remaining on many investment services’ buy-lists for 2016. AbbVie is a key R&D investor in oncology and a number of other bio-pharma areas where leading-edge drugs and formulations can generate huge profits—assuming they’re not eviscerated by trial lawyers and Hillary Clinton first.
A case in point is AbbVie’s recently FDA-approved “Viekira Pak” for victims of chronic Hepatitis C virus genotype 1. For those pharmacists in our readership, this is the company’s goodie package consisting of ombitasvir, paritaprevir and ritonavir tablets additionally nestled together with its dasabuvir tablets. It promises, essentially, to cure this onetime invariably fatal iteration of hepatitis.
The downside—the FDA is also warning of the possibility of death for some patients taking advantage of the Viekira cocktail, which, no doubt, has those trial lawyers licking their greedy chops already. Another problem: other pharma companies are coming up with possible alternative treatments that might be cheaper.
But in the world of big pharma and biotech, the risks of lawfare and that always-capricious FDA are a given. In this area, drug companies are like baseball’s heroic home-run champs. They always take a big swing at the ball, generally resulting in a game-winning home run—or a spectacular whiff. If you can take this kind of company, as well as its roughly 3.5 percent dividend, ABBV might be for you.
Disclosure: This columnist currently owns shares of AAPL and may add to the position under certain market conditions.