The 10-year return on Apple stock is right around 5,000 percent. You can’t take a time machine back to the ’90s and buy Apple. But, you can invest in the stock that could become the next Apple.
“We have compiled a list of 15 ideas for companies 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,’” wrote JP Morgan’s Tom Lee in a recent note to clients.
“We compiled the quantitative and qualitative characteristics of AAPL. Among them are: (i) products that inspire a following; (ii) reputational excellence; (iii) lifestyle products that focus on what one can do with their services/products; (iv) culture of success; and (v) prodigious growth offset by (vi) attractive valuations and (vii) ability to return capital.”
From Lee’s lengthy report, this is the key characteristics that make each of the 15 following companies something like Apple.
NetApp
”NetApp’s easy-to-use software architecture has built a loyal following of customers over the past five years. The company’s software-driven systems are easier to scale and manage relative to the competition, based on our conversations with partners and customers in the field.”
Source: JP Morgan
Amazon
”Over the last 10+ years Amazon has done something we once thought was impossible online—win customer loyalty. The company’s focus on price, selection, and convenience has enabled it to cut through a very crowded physical retail and e-commerce space to earn repeat customers.”
Source: JP Morgan
“Strong user base among corporate enterprises and consumer users. More than 9200 enterprises and 100M+ users. LinkedIn has strong network effects driven by social dynamics and Internet trends. LNKD has established itself as the leading career network.”
Source: JP Morgan
Disney
“Theme parks (Walt Disney World and others around the world, Disneyland Shanghai in development), movies/characters (animated classics, Pixar), ESPN. All three areas mentioned above are unrivaled.”
Source: JP Morgan
Comcast
“Comcast continues to lead the cable and media space with its aggressive culture and leadership.”
Source: JP Morgan
Trimble
“Trimble’s technology is an industry-standard in engineering and construction, surveying, and in agricultural field solutions. Trimble Dimensions, the firm’s international user conference, is now in its 6th year; last year it attracted nearly 3,000 participants from more than 60 countries.”
Source: JP Morgan
Qualcomm
“It spins off plenty of cash but they still think of themselves as a growth company. Returns probably depend on [international] cash repatriation.”
Source: JP Morgan
Accenture
“The company focuses a lot on preserving its culture—First, ACN does not pursue any large acquisitions which might dilute its culture. ACN roots as a pure play consulting company with partnership model resulted in an army of senior partners that own a lot of stake in the company. ACN spends a lot in training its employees—spent $800M in FY11. The company pays a mix of variable and fixed compensation to motivate its employees.”
Source: JP Morgan
Broadcom
“Broadcom is the number one supplier in enterprise networking, broadband, and mobile connectivity semiconductors. Their leadership in digital signal processing, mixed signal/ feature/functionality integration, and best-in-class performance has driven their success in the markets in which they compete.”
Source: JP Morgan
VMware
“VMware is writing the definition of what virtualization is and what it can mean going forward.”
Source: JP Morgan
TIBCO
“The last remaining pure-play integration software company with maintenance renewal rates easily in excess of 90%.”
Source: JP Morgan
QLIK Technologies
“A unique culture that values the employee as an agent of change—’to change the world.’”
Source: JP Morgan
ANSYS
”In the design engineering field there are dedicated simulation engineers that live and breathe this technology. Making it easier, this is starting to expand out to the basic design engineer.”
Source: JP Morgan
Intuit
“Best company in coverage at hiring, developing, promoting and inspiring talent. They are very GE-like (Welch era) in this approach.”
Source: JP Morgan
Cree
Regarding culture: “No Idea, Cree is a black box.”
Source: JP Morgan
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JP Morgan sees these 15 companies at various stages of Apple’s evolution
