Why Apple should tempt investors

By Jon Markman

It's always interesting to see how well a company engages its customers. You love to see the ones that manage to create a fantastic mystique about themselves, and draw consumers into their mythology, news flow and emotional web.

Apple Computer (AAPL, news, msgs) has managed to do this like no other firm on Earth, turning mundane product announcements into a multimedia news event. Two weeks ago, I received a Wall Street Journal e-mail bulletin that blared, "WSJ Alert: Apple Unveils New iPod Models." Can you imagine that kind of news play for many other companies? I guarantee you that when Hewlett-Packard (HPQ, news, msgs) or Dell (DELL, news, msgs) puts out a press release on their next round of new products, they will not get this kind of treatment.

I have certainly seen Apple's magic engage my own kids. A year and a half ago, when my 11-year-old daughter wanted an Mp3 player, she had almost decided to go with the unit of an Apple rival because it had more capacity, features, battery life and adaptability than the iPod micro. But then she tried to explain her choice to a friend on the phone, and she didn't quite feel right. She couldn't explain it. It just felt impersonal, like it was just an object. It has no marketing buzz.

After the call, she turned to me and said, "Daddy, let's just get the iPod." It was then I realized that Apple had created more than a product. It had created a language that helped kids and other consumers explain something about themselves.

Even my 14-year-old son, who is less susceptible to marketing, has fallen under Apple's spell. He told me last night while I was correcting his homework that he scans the Apple product website for changes when he takes a break from his writing, and has made Apple.com, of all things, the home page on his Mac. When the news came out a couple of weeks ago on Apple's new products, I shot them both off an e-mail with the details, knowing that it was one more way that we are connecting as a family. Weird, but true. It's a marketing phenomenon that I thought would fade by now, but it hasn't.

There's probably going to be an opportunity for you soon to add Apple to your portfolio, if you haven't already. Its products and approach have a quality of "newness" that I treasure as an investor. Fundamental quality, value, management strength and integrity are all really important as well, but the ability to regularly shock consumers with ideas, products and emotions that are "new" creates value in a profound way, and merits our attention. The only thing in the way of making Apple a full recommendation is the current price. I recommend you consider it if it dips to the $65 area over the next few weeks.

Bank Shot

If you're looking for a financial stock for your portfolio, check out Boston Private Financial Holdings (BPFH, news, msgs). I admit it's not exactly a household name, though it might be very familiar if you're very wealthy, as it's a private banker, financial planner and investment manager for upper-income families. It has $27 billion in assets under management and $5 billion in balance-sheet assets. Besides the Boston Private Bank brand, you might also know it as the Gibraltar Private Bank or the Borel Private Bank. Some of its investment management brands are Anchor Capital, Sand Hill Advisors, Westfield Capital Management, Dalton, Greiner Hartman and Coldstream.

BPFH is one of my newsletter's core holdings because it has managed to put up great numbers year after year. Shares have risen at a 24% annualized clip over the past 10 years, and they've been up every year of the past decade except 2002, when they fell by just 9%. Earnings growth has slowed down a bit this year, to the 13% level from the high teens, but now the valuation has adjusted to discount the slowdown. It's now trading at around its lowest valuation levels of the past decade, with a price-earnings multiple on 2007 estimates of about 16.

The success of the broad market will be a rather important driver of BPFH's success, and as bidding has unexpectedly picked up here in September, BPFH has really perked up from summer lows. Also, BPFH has spent a lot of money on infrastructure over the past couple of quarters that should pay off in the first half of next year. But, investors appear to be ready to get on board ahead of that boost to earnings. With the stock trading 25% off its April high, I think it's a good buy right now. My target for the stock next year is $34, which would be a 25% gain from today's close.

Jon D. Markman is editor of the independent investment newsletters Strategic Advantage and Trader's Advantage. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication, Markman did not own or control shares of companies mentioned in this column.