Sunday, January 27, 2008

Future Earnings Guidance, A Leading Indicator of Stock Performance

Apple Inc. (NASDAQ: AAPL), Cisco Systems, Inc. (NASDAQ: CSCO), eBay Inc. (NASDAQ: EBAY), IBM (NYSE: IBM), Intel Corporation (NYSE: INTC) and Microsoft Corporation (NASDAQ: MSFT) are six of the Top 20 Innovators of The Innovation Index.

The Innovation Index closed 2007 with 66% gain, crushing the major U.S. indices.

Even though Apple Inc. kicked Off 2008 with bold new innovations, and Apple delivered outstanding results for the latest quarter beating the analyst expectations, Apple shares are down 36% from their 52 week peak of $202.96. Apple had the best quarter in its history. Further, eBay, Cisco and Intel shares are also down 34%, 29% and 29% respectively from their 52 week highs. eBay, Cisco and Intel all had great quarters as well, and beat the analyst expectations.



Why?

On the other hand, IBM and Microsoft had great quarters as well, and also beat analyst expectations. However, IBM and Microsoft shares are trending up, and are only down 14% and 12% from their 52 week highs respectively. NASDAQ composite is also down, but only 19% from the 52 week high.

Thus, IBM and Microsoft stocks are doing better relative to the NASDAQ and also four innovators.

Future Earnings Guidance

IBM and Microsoft came out with positive, uplifting future earnings guidance for 2008. Their earnings guidance either met or beat the street's expectations. Hence, their stocks are trending up! On the other hand, the street perceived Apple's, Cisco's, eBay's, and Intel's 2008 guidance as weak, and below their expectations. Are Apple, Cisco, eBay and Intel sandbagging, or simply playing the conservative earnings guidance game - under-promise and over-deliver? Or are they taking into account the current economic climate, and simply don't want to over-promise?

It's evident though that even these Top Innovators are not immune to interim stock price fluctuations owing to their earnings guidance. The reality is that these companies will outperform, and show a solid earnings growth. At which point, their stocks will go up. For now, because of their relatively weak outlook, their stocks are battered down. Perhaps they provide an excellent buying opportunity to the prudent, value investor.

The Innovation Index Reports:

Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007, and returned 174% over the previous five years (2002-2006). This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invested in the stocks comprising The Innovation Index.

Monday, January 21, 2008

Apple Inc. (NASDAQ: AAPL) Kicks Off 2008 with Bold New Innovations


Apple Inc. (NASDAQ: AAPL) is one of the Top 20 Innovators of The Innovation Index.

Download Apple's Innovation Strategy. Free Download. Pay it forward... Download Now

Apple had an outstanding 2007 - the stock price and market cap more than doubled and finished upwards of 130% owing to such game changing innovations including the new iPhone, the new iPod Touch, and the all new Mac OS – Leopard, and on the strengths of the growing iPod and Mac business. Is iPod, Apple’s best innovation? Or has the new iPhone toppled the venerable iPod?

On the business front, Apple executed and fired on all cylinders, and beat the earnings estimates every quarter. Apple business grew from $19.3 billion in 2006 to $27 billion in 2007, a solid increase of 24%, and net profits grew from $1.98 billion to $3.49 billion, a huge increase of 76%. Apple sold more than 4 million iPhones in 2007. The street expects Apple to sell more than 25 million iPods in the latest quarter, the busiest revenue quarter traditionally.

According to Marketwatch story, “Retail research firm NPD Group says Apple's iPods still maintain a lock on the top spot in U.S. sales of digital music and media players, with as much as 75% of the market.” What are the hottest selling Apple products in the retail stores? The MacBook laptops, the new iPod touch and the video-playing iPod nano digital media players could be the winners in the latest quarter. On the other hand, the revolutionary iPhone not only created a new market and business for Apple in the SmartPhones marketplace, it also paved the way for new innovations including the iPod Touch, that alone created a new segment of buyers in the MP3 players market. Finally, Leopard, the latest Mac operating system, found a stronghold in the Apple crowd with a host of new innovations including the Time Machine, a redesigned Finder, Quick Look, Spaces, and Stacks. Leopard sold more than two million copies in just the first weekend, and we expect Apple to sell more than four million Leopards during the latest quarter.

Apple once again proved to the naysayer that new innovations could create new markets, which in turn can fuel new business and new growth for the business. To the consumers – especially the teenagers, the young adults and the growing Apple community – Apple remains the space-age leader, the king of innovations.

Can Apple top 2007?
One thing is certain with Apple and Steve Jobs: It does not idle. It does not rest. It does not quit.
Apple kicked off 2008 with planned new innovations that espouse unbridled creativity.
The most significant announcement from Apple came in the heavily crowded laptop segment:

MacBook Air
At the MACWorld, Apple® introduced “MacBook® Air, the world’s thinnest notebook. MacBook Air measures an unprecedented 0.16-inches at its thinnest point, while its maximum height of 0.76-inches is less than the thinnest point on competing notebooks. MacBook Air has a stunning 13.3-inch LED-backlit widescreen display, a full-size and backlit keyboard, a built-in iSight® video camera for video conferencing, and a spacious trackpad with multi-touch gesture support so users can pinch, rotate and swipe. MacBook Air is powered by a 1.6 GHz or 1.8 GHz Intel Core 2 Duo processor with 4MB L2 cache, and includes as standard features 2GB of memory, an 80GB 1.8-inch hard drive, and the latest 802.11n Wi-Fi technology and Bluetooth 2.1.
“We’ve built the world’s thinnest notebook—without sacrificing a full-size keyboard or a full-size 13-inch display,” said Steve Jobs, Apple’s CEO. “When you first see MacBook Air, it’s hard to believe it’s a high-performance notebook with a full-size keyboard and display. But it is.”
Here are some of the key new innovations introduced by MacBook Air:
·Thinnovation – or Thin Innovation – the awesome size of the laptop, or lack thereof. The thin design is another testament to the design innovation prowess of Apple.
·Vibrant 13.3-inch LED-backlit glossy widescreen display that is energy efficient
·Spacious trackpad that offers multi-touch gesture support for pinch, rotate and swipe, making it more intuitive than ever to browse and rotate photos or zoom into web pages in Safari™.
·Backlit keyboard that makes it ideal for dimly lit environments such as airplanes, studios or conference halls
·Built-in ambient light sensor that automatically adjusts the brightness of the keys as well as the display brightness for optimal visibility.
·Up to five hours of battery life for wireless productivity and includes AirPort Extreme® 802.11n Wi-Fi networking, which delivers up to five times the performance and twice the range of 802.11g (according to Apple).
MacBook Air does not have an optical drive for playing DVDs or installing software from DVDs or CDs. Apple does provide the Remote Disc feature that allows you to access the DVD or CD drive of a nearby Mac or Windows PC.
Can MacBook Air find a new segment of buyers beyond the loyal Apple base? Would students and teachers rush to buy the MacBook Air? The largest segment of laptop buyers are the business users. Would a business user buy the MacBook Air? Is it compelling enough? What percentage of business users will convert to MacBook Air? These questions will be answered during the course of 2008. For now, MacBook Air is poised to create new growth for Apple in the Mac business line and create sales of over 5 million units in 2008.

iPod Touch
Another key innovation introduced by Apple is “a major software upgrade for the iPod® touch, making the best iPod into even more—the world’s best Wi-Fi mobile device. iPod touch customers already have the most advanced mobile web browser in the world with Safari™, and now Apple is adding five more great mobile applications—Mail, Maps, Stocks, Weather and Notes. The iPod touch software upgrade also includes new features such as Web Clips, a customizable home screen and beginning today, the ability to watch iTunes® Movie Rentals. New iPod touch products shipping from the factory will include the software upgrade and existing iPod touch customers can get the software upgrade for $19.99 by purchasing and downloading it from iTunes.”
The new upgrade will be a blessing for iPod Touch customers. Apple may be bowed to sell the upgrade for free within three to six months; for now, Apple will benefit from incremental revenue from the fifty percent or so iPod Touch customers who will upgrade.

iPhone
Apple also upgraded the iPhone with a free software update “that allows users to automatically find their location using the redesigned Maps application*; text message multiple people in one message; create Web Clips for their favorite websites; customize their home screen; and watch movies rented from the new iTunes® Movie Rentals right on their iPhone.” Now, the loyal iPhone users are locked in for good. For the ones craving to use their iPhones with a real keyboard, perhaps Apple or an Apple partner can provide a basic keyboard accessory. We believe this will increase the market for the Apple iPhone manifolds – a simple keyboard accessory that plugs and plays into the Apple iPhone allowing the non-converts the ability to type away their emails and instant messages without having to learn to tap and enter.

Time Capsule
Apple also introduced Time Capsule, “a backup appliance that automatically and wirelessly backs up everything on one or more Macs running Leopard™, the latest release of Apple’s Mac OS® X operating system including the amazing Time Machine™ automatic backup software. Time Capsule combines an 802.11n base station with a server grade hard disk in one small package. Simply plug it in, then easily set up automatic wireless backup for every Mac® in your house to a single Time Capsule with just a few clicks. Time Capsule offers the benefits of a full-featured 802.11n Wi-Fi base station, and comes in two models: a 500 gigabyte model for just $299 and a 1 terabyte model for just $499.”
Time Capsule is a boon to a small percentage of loyal Mac customers who want backup, and want the best solution in the marketplace. Most Macs feature plenty of hard-disk space though, and most customers do not backup. Can Apple change the customers’ behavior towards making backups an essential part of their lives? Perhaps the business users will buy Time Capsule. The home users will wait.
The feature that is more interesting in the Time Capsule is “the full-featured Wi-Fi base station with the latest 802.11n technology.” “Delivering up to five times the performance and twice the range of 802.11g, 802.11n* is built in to Apple’s iMac® desktop and the entire Mac notebook line up, including MacBook®, MacBook Pro and the new MacBook Air. Time Capsule features a sleek design with a built-in power supply and connections to print wirelessly to a USB printer. With Time Capsule, it’s very easy for users to create a secure, wireless network for up to 50 users and set security restrictions such as Internet access limits for children’s computers.” The wireless networking elements of Time Capsule would be the real hook for homebuyers.

iTunes Movie Rentals
Apple made movie history with the announcement of iTunes Movie Rentals. iTunes® Movie Rentals feature movies from all the major movie studios including 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount, Universal Studios Home Entertainment, Sony Pictures Entertainment, Metro-Goldwyn-Mayer (MGM), Lionsgate and New Line Cinema. iTunes Users can rent movies for as low as $2.99 and watch them on their Macs or PCs, all current generation iPods*, iPhone™ and Apple TV®. iTunes Movie Rentals will offer over 1,000 titles by the end of February, including over 100 titles in stunning high definition video with 5.1 Dolby Digital surround sound which users can rent directly from their widescreen TV using Apple TV. iTunes Movie Rentals are priced at $2.99 for library titles and $3.99 for new releases, and high definition versions are just one dollar more with library titles at $3.99 and new releases at $4.99.
Apple has positioned itself well for the growth of online movie rentals business. Last year, I wrote about Blockbuster versus Netflix – Winner takes All and talked about the real possibility of Apple and Amazon.com (NASDAQ: AMZN) staying and competing with these companies in the race for online movie rental business. Amazon.com is also one of the Top 20 Innovators of The Innovation Index. If the online movie rental business takes off in 2008, look out!

Mac Pro Business
Apple also introduced “the new Mac® Pro with eight processor cores and a new system architecture that delivers up to twice the performance of its predecessor*. The new Mac Pro combines two of Intel’s new 45 nanometer Quad-Core Xeon processors running up to 3.2 GHz, powerful new graphics and up to 4TB of internal storage to offer the ideal system for creative professionals, 3D digital content creators and scientists. The standard 8-core configuration starts at just $2,799.” And Apple® introduced the new Xserve®, a 1U rack-optimized server that is up to twice as fast as its predecessor* and includes an unlimited client license for Mac OS® X Server Leopard™. Starting at just $2,999, the new Xserve has up to two Quad-Core 3.0 GHz Intel Xeon processors for 8-core performance, a new server architecture, faster front side buses, faster memory, up to 3TB of internal storage and two PCI Express 2.0 expansion slots for greater performance and flexibility.
Apple is trying to make a dent in the business segment, and the gaming, web hosting and graphics workstation markets. It remains to be seen how much of a new business these new Mac Pros and Xserve will carve out for Apple in 2008.

Apple 2008 Outlook
How will Apple perform in 2008? The Apple stock will do just fine; although recently, the stock has lost about 20% of its value from a high of over $200, we believe that Apple stock will end 2008 in the neighborhood of $250, or a growth of at least 25%. Apple will have another solid year for iPod, iPhone, Mac and Leopard business lines. Apple will provide a cautious outlook for 2008 sales owing to current economic conditions; however, it will easily exceed the earnings estimates for the current and subsequent quarters owing to strength in its core business including the iPod and Macs, and growth in new business lines including iPhone and Leopard. Most iPod users will begin upgrading to iPod Touch when the base memory increases to around 40 GB. Macs will give PCs a run for the money. iPhone will go global. The icing on the cake could be the growth of iTunes Movie Rentals.

Introducing The Innovation Index Fund - Invest into The Innovation Index
Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance
The Innovation Index gallops to 56% - Quarterly Report - Q3, 2007
About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007, and returned 174% over the previous five years (2002-2006). This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)
The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.
Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

Thursday, January 17, 2008

The Innovation Index closes 2007 with 66% gain, beats major U.S. indices

The Innovation Index had a banner year, and gained 66% in 2007. The Innovation Index beats the major U.S. indices including the S & P 500, NASDAQ and Dow Jones. S & P 500 was up 4% for the year, NASDAQ was up 10% for the year and the Dow Jones Index was up 6% for the year.

The Innovation Index closed at 108.27 on December 31, 2007, up 66% from the closing price of 65.05 on December 29, 2006.


(click to maximize)

2007 Leaders

Research In Motion Limited - (NASDAQ: RIMM) was the 2007 leader in stock performance, with 166% gain for the year. Amazon.com, Inc. (NASDAQ: AMZN) was equally impressive with 135% gain for the year. Apple Inc. (NASDAQ: AAPL) had a great year with 133% appreciation for the year. There were eight other innovators with double-digit gains for the year. Among these innovators, Google Inc. (NASDAQ: GOOG) led with 50% gain. America Movil (NYSE: AMX) was next up with 36% gain in 2007, and Intel Corporation (NYSE: INTC) closed out 2007 with 32% gain. Overall, 13 innovators finished 2007 with positive gains.

2007 Laggards

Six innovators finished the year in the negative, led by Starbucks Corporation (NASDAQ: SBUX) declining 42% for the year. Southwest Airlines Co. (NYSE: LUV) was next, declining 20% for the year. Target Corp. (NYSE: TGT) rounded out the top three, declining 12% for the year. Yahoo Inc. (NASDAQ: YHOO) was down 9% in 2007.

2008 Top 20 Innovators

The Top 20 Innovators for 2008 were announced on December 31, 2007. Here is the alphabetical list of the Top 20 Innovators for 2008:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

2008 Predictions

How will The Innovation Index perform in 2008? So far, the Innovators have been off to a rough start in 2008. The sub-prime mortgage crisis, rising oil prices, and early indications of slowing economy have contributed to negativity on the Wall Street. We believe this sentiment is short-lived, and will only last through the second quarter of 2008. The potential availability of an economic stimulus package will certainly help. The resilient Innovators of The Innovation Index may reward the patient, long-term investor. The key may be to stay with these Innovators through the downturn.

Innovation Index would have returned 66% in 2007 according to our performance model, and would have returned 174% in the previous five years according to our historical model.*

The Innovation Index Reports:Introducing The Innovation Index Fund - Invest into The Innovation Index
Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance
The Innovation Index gallops to 56% - Quarterly Report - Q3, 2007

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007, and would have returned 174% over the previous five years (2002-2006) based on historical model.* This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index. Innovation Index Group closed in 2009.

*Past Performance Does Not Guarantee Future Results. Please refer to Innovation Index Fund Prospectus for details on our offering.

Creativity Innovation Archives