Beginners Portfolio: Apple Inc Confounds The Critics

We have good news from Apple Inc (NASDAQ: AAPL) and GlaxoSmithKline (LON: GSK).

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The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.

appleApple pulls it off

Ahead of a second-quarter earnings update from Apple (NASDAQ: AAPL.US) last night, the pundits were all predicting the same boring stuff — flat overall, with a modest rise in iPhone profits at best, iPad earnings falling, and entry-level products helping push down margins for Apple’s top-end offerings.

But the company surprised us all, reporting profits for the quarter of $10.2bn (£6.1bn) after selling an impressive 43.7 million iPhones in the period.

And in a move to return more of its cash to shareholders, Apple is to buy back a further $30bn of its own stock and bump its quarterly dividends by 8%. Oh, and there’ll be a seven-for-one stock split — the Beginners’ Portfolio will have 14 shares in place of the existing two.

Apple shares were up 8% in after-hours trading last night to $568.

gskA great deal for Glaxo

The other big portfolio news this week is the major deal between GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) and Novartis, with the two companies combining to swap some assets and to pool some others.

Glaxo will transfer its cancer drugs portfolio to Novartis for $16bn (£9.5bn), with Novartis’s vaccines business making the opposite journey in exchange for $7.1bn.

The two firms are also big in the consumer products business, and they’re going to combine their offerings into a joint venture that should enjoy annual revenues of more than £6bn.

Glaxo reckons the net result of the deal will be a boost to its annual revenues of about £1.3bn.

The shares jumped 81p (5.2%) in response to the news yesterday, to 1,640p — and as I write today, the price is up to 1,658p.

TescoSteady at Tesco

I haven’t talked about last week’s results from Tesco (LSE: TSCO) yet, but it was very much “Everything as expected” with no surprises — and as if to confirm that, the share price has hardly budged and stands at 299p today.

Group sales were effectively flat — down 0.2% at constant exchange rates, up 0.3% at actual rates. There was a fall in underlying pre-tax profit of 6.9% to £3.05bn, which was very much in line with expectations.

We should still have a couple of years in the doldrums as far as earnings go, but with dividend yields set to reach 5%, I’m still happy to hold for the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Apple and Tesco, and has recommended shares in GlaxoSmithKline.

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