15 Apple-Like Stocks That Could Bear Similar Fruit (Update1)
A cumulative stock-price gain of 474% in the past three years has resulted in a world-leading market value of $585 billion, and it makes up 4.5% of the S&P 500. That means Apple is a deceptively large part of many investment portfolios.
And therein lies the rub. Many investment funds aren't allowed to own more than 5% of an individual stock due to concentration concerns, even if the weight in their benchmark is larger.
But given Apple's rapid growth, "the stock is simply exceeding ownership limits for many funds and, as a result, investors are asking where the next Apple is," JPMorgan(JPM) said in a research note titled "Circle of Life."
So, with that in mind, the investment firm set its 11 technology analysts to work to come up with a list of technology, media and telecommunications stocks that appear to have the most potential to become the next Apple.
But, of course, Apple's special qualities, such as its virtually seamless blending of one generation of products to another and their ease of use, have resulted in an almost cult-like customer following that is impossible to emulate. Not to mention that its revenue has grown at a 57% compound annual growth rate since 2010.
But the analysts boiled down its success formula to seven key points that "Apple-like" companies must have. They are: products that inspire a following; corporate and product reputational excellence; lifestyle products that focus on what one can do with their services/products; a company culture of success; the potential for prodigious growth; current attractive valuations; and, finally, the ability to return capital to shareholders.
They also screened their research using "qualitative and quantitative metrics" along with those standards to come up with a list of 15 stocks "that our analysts view as having secular growth opportunities, a strong market position and attractive valuation, which make these equities attractive to own as the potential next 'Apple,' " JPMorgan said.
With the caveat that "these companies are at different stages of their maturity," here are JPMorgan's list of 15 Apple-like stocks ranked in inverse order of the number of analyst "buy" ratings they have, per an independent Standard & Poor's survey:
Company profile: LinkedIn, with a market value of $11 billion, is the largest social networking company on the Internet with 100 million member-users. It has more than $500 million in cash on its balance sheet, so expansion into other areas is possible. JPMorgan analysts say: "LinkedIn has strong network effects driven by social dynamics and Internet trends. (It) has established itself as the leading career network."