Bary writes, “For the third year in a row, Barron’s is taking a crack at that question, with our 10 Favorite Stocks for 2013, including blue-chips like Apple (AAPL), JPMorgan Chase (JPM), Royal Dutch Shell (RDSA), and Novartis (NVS), and smaller companies like Barnes & Noble (BKS) and disk-drive maker Western Digital (WDC), which appear sharply undervalued.”
“Apple is still going strong, even as the company’s shares have traded down 23%, to around $540, from a September peak of $705. None of the recent investor concerns — lower margins, supply constraints, management changes, iPad competition, and the iPhone 5 map fiasco — are major,” Bary writes. “It’s true that Apple’s earnings growth has slowed to a 23% rate from more than 100% a year ago, but that’s understandable, given the company’s $156 billion in annual sales.”
“Veteran UBS tech analyst Steve Milunovich recently wrote that it’s a ‘good time’ to add to positions in Apple before year end, with the stock trading near its lowest price/earnings ratio in five years after two disappointing quarters,” Bary writes. “He carries a price target of $780. Apple trades for only 11 times projected profit of $49 a share in its current fiscal year, ending in September 2013. Strip out Apple’s huge cash holding of $128 a share, and the effective P/E is just eight.”
Bary writes,” Even after implementing a dividend — now providing a 1.9% yield — and a modest buyback program, Apple should build cash at a rate of $40 billion annually. There’s room for a higher dividend and a more aggressive share-repurchase program in 2013. Both could play well with investors.”
Full article here.