Smartphone Smackdown: Charles Sizemore and Jeff Reeves Talk Apple, Google, and More on The Slant

Charles Sizemore of Sizemore Capital Management and Jeff Reeves of InvestorPlace chat about the three smartphone stocks at the top of the industry– Apple (NASDAQ:$AAPL), Google (NASDAQ:$GOOG) and Research in Motion (NASDAQ:$RIMM).

Here are the highlights:

Research in Motion: Jeff continues to be bearish (all the way up, admittedly) on RIM and Blackberry going into the January 30 event that will unveil a new line of BlackBerry 10 devices. Charles agrees that Research in Motion’s enterprise dominance is in question vs. other smartphone platforms, and that the consumer market may be too little too late. Sure, there is likely going to be a third player – but that’s more likely to be the Windows Phone from Microsoft (NASDAQ:$MSFT) not RIMM. But what do we know, since the stock has almost tripled from its September lows.

Apple: Jeff likes AAPL stock even after Apple Q1 earnings and remain one of those trapped Apple longs out there.  Charles also thinks Apple remains a very strong company and may be a bargain, but the bottom line is that the short-term volatility is dangerous and there could be considerable downside momentum in the next few months. That’s what happens when a crowded trade sees a race for the exits.

Google: Last but not least, while Charles and Jeff agree on the first two smartphone stocks they differ on Google. Jeff thinks that it’s a bullish sign that the ad business seems to be stabilizing and they have a lot of products in the pipeline that could fuel future growth – such as its dominant Android OS. Charles is skeptical, however, that GOOG can maintain its ad edge and wonders if any of the cute projects like self-driving cars will ever hit the bottom line. (See Microsoft will Crush Google)

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  • mantikos

    OS X is based on Linux too and is sold for $ - so similarly Android can technically be sold for $ but the issue is that the source code is already out there and companies like Amazon (Kindle Fire series) don’t have to pay Google a dime and can make their own OS based on Android and frankly there are many many companies already doing that to the point where the stat of 1 in 4 phones being ‘Android’ while technically accurate isn’t practically true since what these companies are selling is ‘Android’ only in name and basically they are building parallel offshoots based on Android that have no Google services, apps and no ads for Google to make money on and in some cases are an entirely close ecosystem.
    Sorry for the run-on sentence :P

    • http://charlessizemore.com/ Charles Lewis Sizemore, CFA

      Interesting.  It has always been something of a mystery to me when you can and cannot sell a Linux-based piece of software.  It’s been explained to be by both traditional software guys and libertarian/anarchist open-source enthusiasts, and every time I hear it explained, it makes sense…for a minute…and then it’s already fuzzy in my head five minutes later.  It’s legally ambiguous to me.  

      I do agree with you about “parallel offshoots.”  The various Android phones look and feel very different from one another, which gives Samsung et al the ability to brand THEMSELVES rather than the OS.  Whereas with a Windows Phone, the hardware will vary but the look and feel is identical across manufacturers.  This is better for Windows branding, of course, though it makes it harder for the manufacturers to differentiate themselves.  

      Interesting industry…and a lot of moving parts.

  • greg1172

    i have no idea what to do with my apple stock.  lock in $70k in losses (ya ya bought it at $600) or holdout for a rebound.  apple could have an $95Billion quarter Q2 and it would still tank 20% so god only knows wtf is going to happen 

    • http://charlessizemore.com/ Charles Lewis Sizemore, CFA

      If it is any comfort to you, every equity hedge fund and mutual fund manager is asking the same question right now.  EVERYONE owns it…which makes it hard for everyone to get out at the same time.

      Apple is cheap relative to earnings, but it appears destined to suffer the same fate of other mega-large-cap stocks–think MSFT, CSCO and INTC in the late 1990s and XOM more recently.  It may rise from here, but it will be a long time before it sees a new high.

      As for “what do to,” follow your trading rules.  And if you don’t have trading rules, now is a good time to make some.  

      If you are at a psychological impasse and cannot decide what to do, split the difference.  Sell off 10-20% of your shares, reevaluate a week or two later, and consider selling more.  That is what I do when I occasionally get parallyzed with indecision.

      Best of luck,
      CLS

  • Salahmars

    Your thesis does not hold about AAPL.  You assume it is a “bubble”. Apple grew on the basis of real business and solid vaulation and still is.  There is no bubble in Apple.  Statement like yours are almost irresponsible.  You start with an assumption that is wrong to buil a worthless argument.  Prove first that it is a bubble.

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