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As Growth Investors Flee Apple, Warren Buffett Sees Value

Noted value investor Warren Buffett has picked up shares of Apple ( AAPL ) as growth investors have rotated out of the stock. Buffett disclosed in a regulatory filing Monday that Berkshire Hathaway ( BRKB ) bought 9.8 million shares of Apple, valued at $1.07 billion, at the end of the quarter. Buffett tends to focus on slower-growth companies that he believes are undervalued by the market, and he has not been a big tech investor. Meanwhile, hedge fund billionaire David Tepper has sold his stake in Apple, according to a filing with the SEC. Tepper previously held 1.26 million shares, last valued around $133 million, media reports said . On April 28, activist investor Carl Icahn said he had sold all of his shares in Apple. At one point, Icahn owned 53 million shares, or nearly 1% of the company. And Greenlight Capital’s David Einhorn also has been decreasing his stake in Apple. Drexel Hamilton analyst Brian White said Buffett’s Apple investment is a positive sign for the iPhone maker. “Although Buffett has admitted to not understanding technology, and thus avoiding the group for the most part (he also owns IBM ( IBM )), he is always on the lookout for a ‘wonderful company at a fair price,’ and we believe that is what he sees in Apple,” White said in a research report Monday. Investors soured on Apple after the Cupertino, Calif.-based company reported its first year-over-year sales decline since 2003 and its first-ever drop in iPhone unit sales in the March quarter. “In our view, Buffett’s investment in Apple speaks to a much bigger theme around the Apple story — the stock is meaningfully undervalued for such an excellent company with attractive long-term growth prospects,” White said. “In our view, the market gives Apple no credit for its expansive digital matrix across software, services and hardware that deliver a seamless experience for an installed base of 1 billion active devices.” Buffett also has confirmed that he could back a bid for Yahoo ( YHOO ) by Quicken Loans founder Dan Gilbert. Apple stock was up more than 3%, near 94, in midday trading on the stock market today . On Thursday, Apple stock fell to its lowest level in nearly two years, at 89.47. RELATED: Apple Gets Lift From China Ride-Hailing Service Investment .

Facebook, Amazon Are Trying To Knock Down Google By Doing This

Loading the player… Amazon ( AMZN ) last week announced a YouTube-like product called Amazon Video Direct, and now Facebook ( FB ) is reportedly looking to launch its own video-centric service. According to a New York Post report over the weekend, the social media giant is “searching for fresh ways to work with the music industry.” Facebook confirmed it’s testing the use of pictures and videos in a slideshow format accompanied with music for a product called “Slideshow.” The product could potentially lure music video lovers and video creators away from YouTube. Shares are falling 1.1% to 118.44 in heavy volume, nearing the 117.09 buy point it initially cleared in the wake of its estimate-beating quarterly earnings report. IBD’s Take: Get a detailed objective analysis of Facebook and Amazon stocks, and how they stack up vs. rivals at IBD Stock Checkup Facebook came under fire last week after reports accused the influential site of bias against conservative stories in its Trending section. CEO Mark Zuckerberg is meeting with conservative leaders this week over the matter. Meanwhile, Google owner Alphabet ( GOOGL ) is finding support at its 200-day line, an area the stock was able to retake just recently, as it edged 0.6% higher intraday. The stock is still struggling after an attempted breakout past a cup-with-handle buy point failed in the wake of Alphabet’s quarterly report. Alphabet briefly became the largest publicly traded company last week but Apple is now back on top. Apple ( AAPL ) shares are up 3.4% in big volume on news that Warren Buffett took a $1 billion stake in the first quarter, rebounding from their trip below the 90 price level intraday Thursday. The stock is now about 29% below its all-time high reached in April of 2015. And Amazon is falling a fraction in quick turnover as it looks to hold above the 700 price level. Shares are extended 17% past a cup-with-handle buy point cleared not too long before Amazon’s quarterly report.

Best And Worst Q2’16: Information Technology ETFs, Mutual Funds And Key Holdings

The Information Technology sector ranks fourth out of the ten sectors as detailed in our Q2’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Information Technology sector ranked third. It gets our Neutral rating, which is based on aggregation of ratings of 29 ETFs and 122 mutual funds in the Information Technology sector as of April 18, 2016. See a recap of our Q1’16 Sector Ratings here . Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Information Technology sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 384). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Information Technology sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Five mutual funds are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The Van Eck Market Vectors Semiconductor ETF (NYSEARCA: SMH ) is the top-rated Information Technology ETF and the Fidelity Select Communications Equipment Portfolio (MUTF: FSDCX ) is the top-rated Information Technology mutual fund. Both earn a Very Attractive rating. The First Trust Dow Jones Internet Index Fund (NYSEARCA: FDN ) is the worst rated Information Technology ETF and the Invesco Technology Sector Fund (MUTF: IFOAX ) is the worst rated Information Technology mutual fund. FDN earns a Dangerous rating and IFOAX earns a Very Dangerous rating. 506 stocks of the 3000+ we cover are classified as Information Technology stocks. Cisco Systems (NASDAQ: CSCO ) is one of our favorite stocks held by FSDCX and earns a Very Attractive rating. Over the past decade, Cisco has grown after-tax profits ( NOPAT ) by 7% compounded annually. Cisco has improved its return on invested capital ( ROIC ) from 14% in 2005 to a top-quintile 17% in 2015. The company has generated a cumulative $32 billion in free cash flow ( FCF ) over the past five fiscal years. However, in spite of the operational strength exhibited by Cisco, CSCO is undervalued and presents an excellent buying opportunity. At its current price of $28/share, Cisco has a price-to-economic book value ( PEBV ) ratio of 0.8. This ratio means that the market expects Cisco’s NOPAT to permanently decline by 20%. If Cisco can grow NOPAT by just 6% compounded annually for the next decade , the stock is worth $43/share today – a 54% upside. ServiceNow (NYSE: NOW ) remains one of our least favorite stocks held by IFOAX and earns a Dangerous rating. ServiceNow was placed in the Danger Zone in December 2015. Since going public in 2012, ServiceNow’s NOPAT has declined from -$29 million to -$154 million while its ROIC declined from -29% to -41% over the same time frame. The drastic decline in profits and profitability is in stark contrast to ServiceNow’s revenue growth, as the company adopted a “grow revenue at all costs strategy,” which clearly ignores profits. Making matters worse, when we placed NOW in the Danger Zone, its valuation implied significant profit growth and despite NOW falling 21% since the publish date of our report, those expectations remain unrealistically high. To justify its current price of $63/share, ServiceNow must grow immediately achieve 15% pre-tax margins (-15% in 2015) and grow revenue by 23% compounded annually for 13 years . In this scenario, 13 years from now, ServiceNow would be generating over $14 billion in revenue, slightly below Facebook’s (NASDAQ: FB ) 2015 revenue. It’s clear how the expectations embedded in NOW remain overly optimistic. Figures 3 and 4 show the rating landscape of all Information Technology ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.