Beginners Portfolio: Apple Inc Confounds The Critics

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

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.

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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.