Kiplinger's Stock Market Madness 2011: The Road to the Finals
Editor's Note: Apple eked out a victory over Amazon.com in the Championship matchup with 56% of the vote. Do you think the tech juggernaut deserves the crown? Discuss tournament results our Facebook wall.
In the world of college basketball, this year's March Madness has certainly lived up to its name -- not a single number one seed will play in the men's or women's championship games. Similarly, the first ever Kiplinger's Stock Market Madness final features two lesser seeds: number four Apple (symbol AAPL) and number six Amazon.com (AMZN). (For an introduction to how our game works, see STOCK WATCH: Kiplinger's Stock Market Madness.)
Neither giant could really be considered an underdog. But both faced some stiff competition on the road to our championship matchup. In the first round, Apple defeated an unlucky 13th seed, Ford Motor (F), with 64% of the vote. Amazon faced number 11 seed Cerner (CERN), a developer of clinical-information systems for hospitals and health care networks. We picked Cerner as one of our favorite four of the sweet 16 stocks, recognizing it as a beneficiary of health care reform -- the billing and recordkeeping technology it produces helps hospitals and clinics lower costs.
Jay Jones, a Facebook fan of Kiplinger’s, agreed with us: “Working in health care, I've seen firsthand the need for electronic solutions in medical record keeping to improve overall efficiency for hospitals, clinics and private practices and the desire to take advantage of the financial benefits provided by recent health care legislation for moving toward electronic health records,” he commented on our Facebook wall. “Cerner, being one of the biggest developers in health care IT systems, should definitely benefit greatly in the near future.”
Still, big-named Amazon defeated the lesser-known Cerner with 67% of the vote.
The Elite Eight round saw Apple oust number five seed Family Dollar Stores (FDO), the discount retailer, with 75% of the vote. Amazon faced the higher ranked Priceline.com (PCLN), seeded number three in our tournament. The online-booking travel company had benefited from the recession as cash-strapped travelers ventured to its site to cut vacation costs with its name-your-own-price strategy. But even the Negotiator couldn’t help Priceline reach the Final Four. It lost to Amazon in the only shutout of the tournament. (We agree with cutting Priceline; for details on the headwinds we see facing the travel-booking site, see our slide show of 6 Cult Stocks to Buy and Sell.)
In the Final Four, Amazon met with another of our favorite four: second-seeded F5 Networks (FFIV). Jennifer Schonberger, a staff writer for Kiplinger’s Personal Finance, reports in our Sweet 16 Stocks video: “F5 makes networking products that help companies manage Internet traffic. And those products are becoming must-haves for companies because they reduce costs and improve the transmission of data. As the market leader in this area, F5 serves the fast-growing cloud computing and mobile-applications markets and is rolling out new products, which should enable F5 to continue churning out solid earnings gains.” But F5 didn’t sway enough voters, and Amazon won with 73% of the tally.
Apple’s Final Four match-up was against Cognizant Technology Solutions (CTSH). Cognizant, the tournament’s number nine seed, is a provider of information-technology, consulting and outsourcing services. In the previous round, it scored a stunning upset, bringing down top-seeded Netflix (NFLX) with 80% of the vote. Cognizant carried momentum from that win into the next round and kept pace with Apple through much of the voting period. But Apple pulled away in the end with 61% of the vote.
Which of our finalists will take the crown? Both have plenty to recommend themselves. The companies have created innovative products and services that have changed their respective industries. They each have huge and loyal followings. At $180.13, as of April 1, Amazon shares have tripled since the stock market hit bottom in March 2009. But the stock sells at a pricey 56 times estimated 2011 earnings of $3.18 per share. Apple has done even better over the same period, more than quadrupling, from $83.11 to $344.56. Despite Apple’s fabulous gains, the stock sells for just 15 times estimated earnings of $22.96 per share for the fiscal year that ends this September.
For more on both of the finalists, see 6 Cult Stocks to Buy and Sell. Also read Apple: The Core of Every Portfolio? And visit our Facebook page to choose a champion for Kiplinger’s Stock Market Madness. Polls will close April 5 at 10 a.m., and the champ will be announced at noon.