Comments on: Apple, Google Holding Hands…

By: Andrew Schmitt

Andrew Schmitt — Mon, 10 Jul 2006 13:27:44 +0000

The precise argument I made is that the valuation gap between the two sets of companies was irrational and that there should be a convergence. So far I have been correct.

While the Nasdaq is down 5.3% since May 16th, a hedging strategy that sold the favorites against the stepchildren yielded 6.6% minus cost of capital.

By: Dave

Dave — Mon, 10 Jul 2006 11:09:40 +0000

While Andrew's analysis is an interesting one, it has little reality in it. (Of course, sotck prices also have little to do with reality either!)

Just look at his article…

The graphic groups three of his "four horsemen" with Google - even though one could simply get a MUCH closer relationship by replacing Google with Yahoo.

He talks about how Web 2.0 is based upon PCs - completely ignoring the fact that Apple is a PC maker.

Oh, and talk about convenient agruments. He begins his article with this quote:

'Your broker was overheard in 2000 “Yes, things are in fact a bit irrational but these companies have real products, revenues, and earnings…'

And then somehow turns it around to claim Intel, Dell, and Microsoft are better buys for precisely those reasons.

By: Gerald Buckley

Gerald Buckley — Sun, 09 Jul 2006 15:40:36 +0000

Mr. Malik- I think you're going to see a BIG cheer from the developer bleachers when the keynote is delivered and Leopard is unveiled.

I can only hope the XServes are finally migrated over to the Intel platform and that WebObjects gets rolled into XCode (for free). I can dream can't I?

As for the valuations of Google and Apple… I'm no financial analyst. But, it seems to me you could pick a couple dozen publicly traded stocks and have visual parity on the charts. The fact it's Google and Apple just makes it fun to speculate.

Gerald in Tulsa

By: Andrew Schmitt

Andrew Schmitt — Sun, 09 Jul 2006 12:11:25 +0000

Good one… really need to put some stats in to get a quantitative correlation but visually you are right.

All this tells you is money flow is the #1 driver of markets.

The Fed flow of funds report is the most neglected piece of raw data that provides a good indicator as to what is happening in the economy.

By: phil

phil — Sat, 08 Jul 2006 23:48:24 +0000

amd is no darling. it has gotten crushed from the 40′s to the low 20′s since february and off some 30% for the year. more an orphan given the viscious price war of attrition it and intc are roiling.

http://stockcharts.com/h-sc/ui?s=AMD&p=D&yr=0&mn=6&dy=0&id=p35008597377

and look at this one, the rlnshp between googs and oil services is tighter than googs and aapl over 52wks…

http://ichart.finance.yahoo.com/z?s=GOOG&t=1y&q=l&l=on&z=m&c=OIH&a=v&p=s

big whoop…

By: Om Malik

Om Malik — Sat, 08 Jul 2006 19:17:08 +0000

andrew,

thanks for the comments. i agree, and actually was looking for this post of yours and then lost track of my own thought process. reminder is good. i appreciate it.

AMD has already managed to disappoint us - so we now wait for the others to do the same?

By: Andrew Schmitt

Andrew Schmitt — Sat, 08 Jul 2006 19:00:03 +0000

A correlation like the one above is a troubling sign for a market. The correlation of both indicates that their valuation is driven more by speculative money flows than value.

The trick is to determine where the money will flow when it flows out of the darling tech stocks like GOOG and AAPL. I happen to believe that the money will flow from the current 4 darlings – AMD, HP, Google and Apple into the four stepchildren – Microsoft, Yahoo, Intel, and Dell.

A more detailed analysis here.

http://www.nyquistcapital.com/2006/05/15/the-new-four-horsemen-of-web-20/