By Dan Burrows, BNet

Apple (AAPL), the hottest stock on the planet -- LinkedIn's IPO notwithstanding -- is an overhyped tech stock, right? Actually, by relative valuation measures, data suggest it's cheap.

Ordinarily index investors needn't concern themselves with an individual stock's valuation. That is to say, if a stock looks cheap by price/earnings ratio (PE) and likely to go higher, or too expensive and therefore bound for a fall.
But Apple accounts for huge chunk of some very popular ETFs and so we thought we'd give it greater scrutiny.

Even after rebalancing by the Nasdaq, Apple will still account for 12% of assets (down from 20%) of the PowerShares QQQ ETF (QQQ). Apple is also the largest holding of the iShares Dow Jones U.S. Technology Sector Fund ETF (IYW), accounting for about 14 percent of the fund's assets, according to the latest data. And at the Internet Architecture HOLDRs (IAH), Apple makes up 23 percent of the portfolio. Not that you would actually own the Internet Architecture HOLDRs.

Since Apple has so much sway in those ETFs, we thought we'd take a look at some relative valuations measures -- all of which suggest the stock is a bargain.

For the rest of this article, click here.


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leowaldman

Don't buy any stock unless it pays good dividends. and what happens after Steve Jobs?

May 24 2011 at 10:31 AM Report abuse rate up rate down Reply
itmtrading

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May 24 2011 at 7:14 AM Report abuse rate up rate down Reply
tanddhoob

Have you seen Steve Jobs lately? Know anyone who has? And what happens to Apple's stock if Steve doesn't come back from his latest health leave? If he...you know, NEVER comes back? I know of few companies--certainly not Microsoft--where the company is so dependent on the one person at the top.

May 24 2011 at 12:03 AM Report abuse rate up rate down Reply
gb

yeah what is apple's TRAILING average earnings. its easy to say that apple looks cheap if you price in their current or forward earnings as sustainable, but thats absurd to say the least. all products age, and we are in the midst of a depression. if apple's yearly earnings fall from $20/yr to $15/yr, is $300 still cheap? What if apple's earnings fall to $10/yr? As you can see, if your late to the party, you should just stay away.

May 23 2011 at 2:28 PM Report abuse rate up rate down Reply