Two Stocks for the E-Reading Revolution
Stock Market Analysis Video
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Last Saturday, I had the pleasure of attending the second Boston Book Festival. It’s fitting that our historic city has an event devoted entirely to the written word, as it is home to the oldest free public city library in the world supported by taxation and the first to allow its patrons to borrow books and other materials.
The festival is held in Copley Square, also the location of the Boston Public Library, and plays host to a variety of events, like author readings and discussions, book signings, live music and children’s activities. My favorite parts were the author readings and discussions and I was fortunate to be able to attend two featuring some of my favorite writers: Bill Bryson and Joyce Carol Oates.
In recent years, people have bemoaned the effects the rise of the Internet and e-readers have had on books, but the festival proved that while the medium in which we read books may be changing, the written word is here to stay.
Last year when I attended the festival, I wrote about Amazon.com (AMZN), maker of the Kindle e-reader. After that, the stock has meandered higher, ultimately topping out with the overall market in the spring. It got hit in the summer volatility, but has climbed rapidly since the market resumed its upward trend in early September. This is what Cabot Top Ten Weekly Editor Michael Cintolo had to say about it on September 13:
“Retail has not been the place for growth stock investors in recent months, but there have been some signs of life in the sector, and Amazon remains a leader in the field. The reason for the stock’s strength lately surrounds its major price cut for the new version of its Kindle e-book reader, which can be had for $139 (compared to $399 when it was first released three years ago). That price cut is sparking sales of the device in a big way—one analyst sees nearly five million Kindle sales this year alone—and it doesn’t hurt that Best Buy will also begin selling the Kindle at its stores in the weeks ahead. Of course, the Kindle is just one piece of Amazon’s story; top management has guided the firm into the #1 position in online retail. We like the 40%-plus sales growth each of the past three quarters despite the weak retail environment, as well as the 35% earnings gain projected for 2011. It’s not a new story, yet it looks like the company is set to get a lot bigger in the quarters to come.”
But Amazon isn’t the only company with a successful e-reader. Apple (AAPL) sold 4.2 million of its iPad tablets in the most recent quarter. While the iPad isn’t strictly an e-reader, it does compete with the Kindle, especially with those customers seeking more functionality from the device. Here’s what Mike had to say about the stock in late September:
“Apple needs no introduction, as it’s one of the best-known (and best-loved) companies today. The big news during the past few months was probably news that did not come about—after a well-publicized mess-up with its new iPhone (antennaegate), consumers didn’t storm out and the issue seems to be resolved. And that allows investors to look ahead to the many other irons Apple has in the fire, such as the fast-selling iPad (some now see north of 20 million sold during the next 12 months), a possible new iPhone using Verizon’s network (this could be particularly huge for business), new Mac computers, and the new Apple TV, which allows Netflix streaming and movie rentals right to a TV. Sales and earnings growth remains terrific, and valuation, at 22 times trailing earnings, is surprisingly reasonable.”
AAPL hit new highs recently and while it stumbled a bit after its earnings report on Monday, the stock recovered as the week went on. And the company is clearly going strong and has a lot of potential for the future. Just this week, Apple held an event focusing on its Macintosh computer where it announced a new operating system, called Lion, and a new version of its ultra-thin Macbook Air.
And if the trend toward reading on devices, rather than from books, continues, both of these stocks stand to benefit. You could buy them here and hope for the best or you could get more expert buy, sell and hold advice from Mike in Cabot Top Ten Weekly. Click here to learn more about Amazon, Apple and other leading stocks.
In this week’s Stock Market Analysis Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says that there’s nothing very complicated going on in the markets right now. After a long uptrend that began strongly in September, the markets advanced for a month, corrected, resumed their uptrend, and corrected again. Stocks discussed include Netflix (NFLX), Cree Inc. (CREE), Agrium (AGU), John Deere (DE), Alexion (ALXN), and Rightnow Technologies (RNOW).
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In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
On Monday, Timothy Lutts discussed a paper published in The Journal of Economic Perspectives, titled “Mental Retirement,” that concluded that the earlier people retire, the sooner their cognitive functions begin to decline. Tim also discussed a recently recommended small-cap stock.
On Thursday, J. Royden Ward discussed why it’s important to invest in dividend-paying stocks. He then discussed his 10 “super companies” (which pay dividends) that he thinks should be in your portfolio. Featured stocks: Abbott Laboratories (ABT), Aflac (ALF), Colgate-Palmolive (CL), General Dynamics (GD), International Business Machines (IBM), Johnson & Johnson (JNJ), McDonald’s (MCD), PepsiCo, Walgreen (WAG) and Wal-Mart Stores (WMT).
Until next time,
Editor of Cabot Wealth Advisory
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