Apple's far-reaching ripple effect

With Apple now among the most reviled stocks, people are fleeing derivative plays as well.

By Jim Cramer Dec 17, 2012 10:13AM

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Editor's note:

Cramer wrote the post before the market open, when Apple and most stocks mentioned dipped. While many, including Apple, have recovered in morning trading, there's no denying the ripple effects from Apple's recent plunge from over $700 to near $500 in the tech sector.

 

Have you noticed the bizarre moves in tech lately? Apple (AAPL) has become among the most hated stocks in the universe -- something to be exacerbated Monday, I am sure by Citigroup's merciless downgraded call from "buy" to "hold." So now, people are fleeing not just Apple but all of the Apple plays. The plunge, for example, in Cirrus (CRUS), the Apple sound play, is hideous and seems to be accelerating. Qualcomm (QCOM) is now swooning. We own Broadcom (BRCM) for ActionAlertsPlus.com, and it's become a tough hold, even though the company recently guided up and is not dependent upon Apple as so many semiconductor companies are.

 

But technology represents a huge chunk of the S&P 500 ($INX), so you can't just overlook it if you are a portfolio manager. You have to take that Apple money, and that Apple-related money, and put it elsewhere in the sector.

 

Now, this is no mean feat. First you have to deal with the fact that Apple's so-called "disappointing" numbers would be nirvana for just about every other player, at least in the personal-computer area. Buying Microsoft (MSFT) here just seems like a lesson in taking a beating. Intel (INTC) is no different. We heard from Dell (DELL) last week and there's nothing worth owning there, despite Goldman Sachs' upgrade from sell to buy last week. Hewlett-Packard (HP) is a disaster and I don't think it is done going down. Western Digital (WDC) and Seagate (STX), two obvious suppliers, are dirt cheap -- but, unless they go private, they are just decent dividend plays, particularly Seagate with its 5.5% payout. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

 

The obviousness of the declines in PC land sends most investors looking elsewhere.

So where have they been going? First, they have sought to find the stocks that have still beaten expectations handily. Unfortunately, that's a very small universe. There's Salesforce.com (CRM) and most recently there's Adobe (ADBE). EBay (EBAY) is quasi-technology, and that's worked well.

There are also two prospective earnings reports that could produce some highlight names as proxies for tech -- notably, Oracle (ORCL) and Accenture (ACN), both of which are set to report this week. I expect Oracle to be fine, although I worry that so many think it will to be much better than fine. As for Accenture, I like it and think it can surprise to the upside once again. Both of these are similar to IBM (IBM), with delicious recurring revenue from long-term contracts.

 

What else? This weekend we learned that Cisco (CSCO) could be selling its Linksys home-router business, something you might know as that little blue box attached to your cable wire. I never understood this acquisition to begin with, and I think that the disposal will be well-received.

 

That desire to own Cisco has spread to a host of networking stocks. That includes competitors Juniper (JNPR) and Ciena (CIEN), even as they have been missing quarters, as well as Xilinx (XLNX), a chip supplier.

 

Sure enough, other more-industrial chip companies have been doing well, too, including Texas Instruments (TXN), and Cypress (CY), which is more of a play on the Amazon (AMZN) Kindle and other non-Apple devices and looks incredibly attractive to me. So does Analog Devices (ADI).

 

The distributor plays look cheap, notably Arrow (ARW) and Avnet (AVT), and those who think Europe is turning can even look at Tech Data (TECD).

 

Finally, there's big data, and there I like EMC (EMC) and Akamai (AKAM) for storage and for streaming.

 

What's funny is that all of these non-Apple plays do not have anywhere near the possibility of besting Apple for product or even earnings momentum. But it doesn't matter. They are chits in the tech game, and right now those chits have more value than Apple and all of the players on its stage.

 

JimCramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is  long AAPL, BRCM, IBM and EMC.

 

 

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34Comments
Dec 17, 2012 10:38AM
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If companies like Apple would split their stock maybe the common man could

buy a few hundred shares.

Dec 17, 2012 11:40AM
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Its all taxation related. So many people bought apple around $380-$400 and are facing huge capital gains tax next year. So the smart play is unload it this year and buy it back in January.

Municipal bonds are doing the same thing. After a year of huge gains they are suddenly selling off.

You may consider that there is something fundamentally wrong with Apple or with double tax free 5%+ returns suddenly but the more rational explanation is gain.

I swear I have always thought that Obama's presidency will be marked by "unintended consequences" and it will be.

Dec 17, 2012 10:48AM
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isn't apple anymore really just a toy store?  what new technology is coming around to truly change the world?  that's what helped make the 90's take off.  serious gains in functional technology.
Dec 17, 2012 12:07PM
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Everybody sing and dance !!!! Another  "HOPE"  rally today !!!
Dec 17, 2012 2:46PM
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Wow.  I was slammed in the last month when I said not to touch Apple stock.  Where are the slammers now?  Taking out loans to cover their losses?
Dec 17, 2012 1:33PM
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All I know is-- it's another MONDAY... the DOW is up and the ECONOMY is dead. When does this finally get old?
Dec 17, 2012 2:33PM
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 The sell off of Apple has nothing to do with fundamentals but with programmed trading by institutional investors.  Once again, the average investor is being burned especially if they don't know how to put stop-loss orders in on their high flying stocks.
Dec 17, 2012 2:49PM
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Sell sell sell!!! While I buy buy buy!! Thank you.
Dec 17, 2012 1:40PM
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man this guy amazes me ...how does he keep his job repeating nonsense daily?

he knows how markets and trading work but he can't beat the indexes with his crappy picks 

Dec 17, 2012 2:40PM
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Pump and Dump for another bored and directionless market!
Dec 17, 2012 12:48PM
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The only thing really needed in a smartphone is 911. All the rest of its "features"are conveniences or for fun. That is not enough to make Apple the most expensive company in the world, except in today's moronic, entertainment-mad, me-first world.
Dec 17, 2012 6:16PM
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Jim, if you're going to write an article, at least come up with a topic that has true insight and not just latch on to the hot topic with nebulous insight and pointless banter.

 

There are natural waves of popularity, MSFT, Google, RIMM, Apple, etc.  Regardless of what they've done in the past and what they are going to do in the future you can only guess what people will gravitate towards.

 

RIMM died on the vine, not because they were crappy technology, but they lost the edge that made them cool, and if you look at the trends in technology, don't look at what the 40 year old father and mother of two are doing... they aren't cool.  Look at the pre-pubescent because in 4 years the rest of us will catch up to their hip ways. 

 

No one wants to do what their parents are doing, RIMM was "my dad's phone" and iPhone is going the same direction.

Dec 17, 2012 5:42PM
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Little more than a month ago Apple was going to 800 as per JC?
Dec 17, 2012 11:23AM
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Oh Jimmy, tick tock here comes Windows 8 for mobile devices along with Intel Atoms Inside. Did you ever hear of the Nokia Lumia 920 that beats the skinny girly iPhone 5 in very spec except weight.  Oh well, you made 5000% on Apple while doing nothing so you better come up with another idea.
Dec 17, 2012 2:41PM
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Buy as much Apple as you can afford!!!!!!!!!!!!!!!!!!!!!!!!!!
Dec 17, 2012 11:24AM
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cars that park or break on their own are coming along. 

 

manufacturing wise there are nice new machines to economically produce parts in a backroom.  but the companies i hear doing this work are not public stock companies.  (3d systems). 

 

the logistics of moving material is being well honed.  many companies i see as suppliers to my day job carry near zero inventory yet deliver in 3 days to 3 weeks which is warp speed anymore.  but again, i think the material handling logistics improvements are coming from non-public stock companies.  (look up manufacturing resource planning software or enterprise resource planning software). 

Dec 17, 2012 1:35PM
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"If companies like Apple would split their stock maybe the common man could buy a few hundred shares."


You don't want to sink your fiat savings into Apple, it's rotten to it's foreign-manufactured core.

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