I'm not a stock advisor, or even a savvy investor. This is just parroting general stuff I've heard elsewhere. Don't take it as investment advice.
You could look at the P/E. It's certainly not the only thing you should look at (a company can boost profits by creative accounting, or by cutting research to make short term gains and boost the CEO's bonus, and there's other factors too), but if you want a back-of-the-envelope way to see whether the price is right, P/E is the obvious choice.
Microsoft is cheap - under 10. People figure it will earn lots of dough, but gradually lose out. If you think Microsoft will reinvigorate itself, and start capturing large and profitable new markets, it may be underpriced.
Apple at ~15 is pricey, but not really high. People figure it will continue to grow (compared to Microsoft), but it's no longer a hot new thing with huge growth potential.
Then there's Dell, which is making money, but with a lower P/E people figure it's likely to be bled dry before Microsoft.
Of course, this is comparing three tech companies. The P/E of all these companies will be hit by broader market factors (which I don't understand). But by comparing similar stocks, you can ask which one the market seems to have been most wrong on. Will Apple go on strongly but not really grow much, while MS limps, and Dell fizzles?
You could look at the P/E. It's certainly not the only thing you should look at (a company can boost profits by creative accounting, or by cutting research to make short term gains and boost the CEO's bonus, and there's other factors too), but if you want a back-of-the-envelope way to see whether the price is right, P/E is the obvious choice.
Apple and Microsoft: http://ycharts.com/companies/AAPL/pe_ratio#zoom=5&compCo...
Microsoft is cheap - under 10. People figure it will earn lots of dough, but gradually lose out. If you think Microsoft will reinvigorate itself, and start capturing large and profitable new markets, it may be underpriced.
Apple at ~15 is pricey, but not really high. People figure it will continue to grow (compared to Microsoft), but it's no longer a hot new thing with huge growth potential.
Then there's Dell, which is making money, but with a lower P/E people figure it's likely to be bled dry before Microsoft.
Of course, this is comparing three tech companies. The P/E of all these companies will be hit by broader market factors (which I don't understand). But by comparing similar stocks, you can ask which one the market seems to have been most wrong on. Will Apple go on strongly but not really grow much, while MS limps, and Dell fizzles?