RDI Reading International, Inc.

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Below the Belt: The TV Wars

RTMB's new feature - Below the Belt - will post here on a periodic basis providing the smart investor with tidbits of information allowing profitable opportunities...This is RTMB's fourth installment..

A headline title showing up in today's mainstream internet sites states "Apple TV is Irrelevant." Of course the author is wrong and way off base.

All indications appear that Google (GOOG) and Apple (AAPL) are ramping up to stage a massive battle for ownership of the airwaves. Much money, development, time and effort has been spent. Google has set up a beta site, a small midwestern town named Kansas City, Kansas (it is small in comparison with KC, Missouri).

Google is using that city as a site to test out it's wi-fi network for the entire area. Recently there are signs that it goes beyond that. The local newspaper reported that Google is installing super-speedy Internet service in area that also applies for set-top box.  

filed with the Federal Communications Commission on Tuesday signaled yet again that Google Inc. looks poised to sell television programming with its coming Internet service in Kansas City.

An application to the FCC submitted by Google Fiber — the Google division promising ultrafast Internet service to the Kansas City market — calls the device “GFHD100.”  It is speculated that it stands for google fiber high definition. A test report submitted to the FCC  suggests the black box will have inputs for USB data hook-ups; LAN — or local area network — computer cables; and HDMI — high-definition multimedia interface — lines for digital audio and video signals. It also includes a Wi-Fi transmitter for wireless data signals that require approval from the FCC.

Google has also applied for an FCC license for an “antenna farm.”. Such a collection of satellite dishes could be critical for capturing commercial television programming. The company has also gained licenses in Kansas and Missouri to sell television service.

Google announced more than a year ago that it would build a high-speed Internet network in the Kansas City market, including fiber optic cables to homes capable of delivering download speeds 100 times faster than the national broadband average.

Google would likely need to provide a bundle and offer a TV package to lure customers away from the cable and phone operators who sell Internet hook-ups to most households.

In the meantime, the whispers about Apple TV continue to increase. Apple, of course, has been silent about its future products. However, CEO Tim Cook recently gave an interview at the AllThingsD conference and said that TV “is an area of intense interest for us.” According to a report by Piper Jaffray analyst Gene Munster, Apple should unveil a new TV display in late 2012 and launch it within the first half of 2013. He cites supply chain checks, various third party reports.

RTMB recommends GOOG and AAPL for long-term investing. Both stocks are very volatile and not for those who can't withstand short term double digit percentage drops.

According to CNBC’s All-America Economic Survey in March, half of all households in the United States own at least one Apple product. Furthermore, homes that own at least one Apple product own an average of three. Overall, the average household has 1.6 Apple devices. One-in-10 homes that do not currently own an iProduct plan on purchasing one next year. If Apple is successful with a TV unit, one can only expect these statistics to improve. An apple TV product can only add to an increase in revenues.

If you are a long-term investor, the best opportunity to buy a growth stock is on a market dip, and that opportunity may be presenting itself right now in GOOG. The analysts predict earnings will increase 21.60% this year and another 19.20% next year.

Please note, however, the GOOG P/E ratio of 32.96 is twice the market P/E of 14.40. Apple's PE is below the market PE of 14.40. Apple pays a cash dividend, Google does not. If buying only one of these stocks, it should be AAPL.

Information regarding Google was obtained here.

 

The most recent picks by «RobMarketsBlind» are:
A buy rating on Acadia Healthcare (ACHC),
a buy rating on Reading International (RDI) and
a buy rating on Aqua America (WTR).

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APPLE INC (AAPL): Free Stock Analysis Report
 
ACADIA HEALTHCR (ACHC): Free Stock Analysis Report
 
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
 
(RDI): ETF Research Reports
 
AQUA AMER INC (WTR): Free Stock Analysis Report
 
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