Out On The Limb

AAPL and GOOG appreciated over 100% last year.

Apple and Google are two stocks that I’ve held for a while and are two reasons that my retirement goals may yet be achieved. They substantially outperformed the U.S. equity markets, which themselves were up 20%-40% depending on the index one prefers. But as the British people said to Churchill when they threw him out in 1945, thanks, but what are you going to do for me next?

Each company now has a market capitalization close to $200 billion, and--let me go out on the limb here--it’s impossible that either will see another doubling of value in the next twelve months. Apple and Google have high expectations baked into their prices, and even a slight hiccup could cause their lofty values to tumble.

Moreover, they’re now encroaching on each other’s turf: Google released its Nexus One smartphone yesterday to battle the iPhone, and Apple’s new tablet will tempt eyeballs that are fixated on Google’s Chrome/YouTube/Docs offerings to glance away.

So, which stock is the better investment?

John Snyder, manager of the John Hancock Sovereign Investors fund, said he'd be buying Google over Apple.

Mind you, his fund holds both stocks and he said he's in no hurry to sell his Apple position anytime soon. But he noted that Google is a better value right now -- its stock trades at about 23 times 2010 earnings estimates compared to a P/E of 27 times fiscal 2010 earnings estimates for Apple

I agree with Mr. Snyder that Google has more potential but like him will keep both holdings for now. Time to reduce the downside risk, however, by selling covered calls.