That little-known stock AAPL

Apple (AAPL) is the largest stock by market capitalization, and probably the most talked about common stock these days.  Quarterly earnings were announced last week and they were very good.  It's had a few days to settle down now, time to see how it looks as a value stock.

AAPL $584
Est. earnings 2012 $46.87
Est, earnings 2013 $53.93
Book value: $109.63
Dividend: currently 0 but have announced a $10.60 annual dividend for later this year

Looks good to me!  A price/earnings ratio of 12, expected growth, and a return on investment of 45%.  My five year projection shows a price of $2,100 while collecting $112 in dividends.

Colgate-Palmolive: Another good one

Here's a blast from the past: Colgate-Palmolive (ticker: CL).  My stocks are starting to look like the Nifty Fifty from half a century ago.  Here are the stats:

Price: $99
Dividend: $2.48
Est. EPS this year: $5.40
Est. EPS next year: $5.90
Book value: $4.95

Not so much a growth story, more of a blue chip that pays out nearly half of income in dividends.  But look at the return on equity: they make more each year than is invested in the company.  What a fine business!

My projections show a future (5-year) price of $486 while collecting $35 in dividends.  And you use their products every day.

IBM

IBM, trading at about $200 a share lately, is one of the stocks I have liked for some time and still like today.  Their earnings report came out a couple of days ago, showing earnings up 7% and flat revenues. The story is that IBM is transitioning from a hardware company to a business services company, the latter being more profitable.  IBM continues to be successful managing big data and providing IT services to big companies.  It's a fine business and only getting bigger.

Look at the numbers:  IBM has a book value of $17.31 a share, according to Yahoo! Finance, and 2012 earnings are estimated to be $14.92.  That's a fine profit engine, a return on equity of 71%.  The stock pays a $3 dividend and reinvests the rest back in the company, where it will get that nice return.  When I project out the growth for five years, I find an estimated future price of over $1,200 a share, while collecting fifty bucks or so in dividends.  So yeah, I like it: salute to Big Blue.

Retirement: WWII Generation Doing OK

My parents' generation seems to be doing OK financially in retirement. Mostly widows in their 80s and 90s now, their expenditures are pretty modest: no house payments (mortgage long ago paid off), drive maybe 3000 miles a year, if at all, property taxes $1500 a year or so. Of course, they have to pay for electricity, telephone and heat like everyone else, and a gardener to do the yard, but it doesn't add up to that much - nor do they eat all that much! They don't travel often, and then it's just to visit the grandkids. Medicare covers the doctor bills.

Social security more than covers their expenses, and they have investment income as well. The question I get most often is: where should I invest my money - it's piling up in the checking account. Of course, the sage advice is to put it in something super secure, because you're not going to earn it back if you lose it at your age. But they like to take a flyer in the stock market - better odds than gambling, that's for sure, and it's interesting tracking the stock prices day to day. Seems like the biggest risk is having to move to a nursing home, esp. in case of Alzheimer's. Some have insurance for that, as Medicare doesn't cover it.

Bonds and beyond

I've finally settled on a strategy for my "bond" money (money not tied to common stocks and paying interest/dividends). It's based on using ETFs instead of bond funds - easier to trade and track methinks. So here it is:

50% VCSH (Vanguard Short Term Corporate)
25% TIPS (iShares Inflation-protected Treasuries)
25% Money market fund

Inflation is quite low now, but I worry about it because the national debt keeps growing by leaps and bounds. There's only four ways out: default, raise taxes, cut spending, inflate. I'm thinking the last of these will be the choice of the powers that be, and my three investment choices should keep their value during inflationary times.