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Tuesday, September 11, 2007

Looking Through the Apple iPhone

Many institutional investors focused on Apple Inc. shares (AAPL) during the June run-up to the iPhone release. Mom & Pop investors (a popular industry moniker for the individual investor) jumped on board and drove the price of Apple shares to $146 near the end of July. Somewhere around that time a mid-day high of 148.92 was reached. Stock trading is not a horse race, however. Investors need to take their blinders off and look at the synergies Apple, Inc. generates.

AT&T (T) is an interesting play. From a low of 33 at the beginning of 2007 it reached $41.93/share at some point in the past 8 months. Any good news from Steve Job's team at Apple, Inc. on Oct. 16 is quite likely to rub off on Randall Stephenson's AT&T. A recent article in USA Today suggests AT&T is using the iPhone boost as a platform to jump into other wireless market services.
Internet Cafe, Dublin 00052
The WiFi computer connection is no longer viewed as a threat, at least for one phone company. The USA Today article cites Stephenson saying that data usage by iPhone users is double what AT&T expected. Half of that was at WiFi hotspots. T-Mobile (DT or Deutsche Telecom) provides quite a few of those WiFi hotspots if I remember correctly. Starbucks (SBUX) and T-Mobile have an arrangement going that many people count on for a few minutes every day. Starbucks and Apple have a cute arrangement to tell an iPhone user when they are near those ubiquitous coffee shops.

One company called FON is even trying to give free WiFi routers to people that live near a Starbucks coffee shop. Why would a firm go to such lengths to provide a WiFi connection to the Internet?

Hotels, libraries, and even homeowners, with unsecured WiFi-capable routers, support a multitude of wireless computer users. The iPhone, all laptop computers and many other portable devices can jump on the web using those connections as well. Deep down in the iPhone and many devices a tiny device made by Broadcom (BRCM) facilitates this WiFi link. Broadcom shares were $26/share at this time last year, right now my stock ticker displays $35.50. Qualcomm (QCOM)is also in this business but failed to play by the rules here in the U.S.. Would you say I made a mistake buying Broadcom shares last year?

I could not pick out all the good technology shares very well so I bought shares in an ING fund called IDTOX. I know there are better technology funds but there were many that performed poorly too. I'm OK with an initial 11% 12-month gain on such a broad play as IDTOX. They brought DST Systems (DST) to my attention, I will not forget that. DST shares are up $1.80 today. My investing is for retirement 20 years from now, not immediate income this year or the next.

Looking overseas, EWT, an exchange traded fund, based on the Taiwan market is up about 100% since the tech market crash settled down in 2002. PRMSX is up 275% since that same point. Why invest in funds if you want AAPL-like returns? Taiwan is the home of Hon Hai (AKA Foxconn). Hon Hai makes iPods along with a host of other electronic devices sold in Europe, Japan, North and South America. Those two funds, EWT and PRMSX, also have rather low fees of around 1.25%, attractive costs for phenomenal long-term returns. Of course rich people may soon stop buying electronic gadgets altogether and get into organic gardening. That's a risk you just have to take!

My shares in a T. Rowe Price Latin Fund (PRLAX) are up nearly 60% in 12 months, even in this volatile market. Why? A mobile phone company called America Mobile (AMX) is one reason. There is a huge potential for growth in Latin American cell phone markets, unlike the saturated EU and U.S. markets. Latin America energy firms drove up those PRLAX shares too.

So I started started talking about a new phone producer, Apple Inc., and ended with a Latin American cell phone service, America Mobile. In the middle I mentioned AT&T, Broadcom, DST, Starbucks, and T-Mobile.

NOTE: I don't directly own SBUX, QCOM, or DT shares but I have owned the other firms for quite some time now. A fund I have managed for the past year owns shares in PKX (up a measly 150%) but that's another story...

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