Riddle Me This – What’s Better Than Apple Stock?

In one corner, we have a company that owns commercial real estate. It owns properties located all over the country, mostly stand-alone buildings with one or two tenants, many of them leased to banks. This company was thoroughly sideswiped in the recession. It was forced to pay its dividend in stock rather than cash for a while. Revenues have slipped nearly every year since the recession of ’08. Cash flows have not yet recovered, but have at least stabilized. On the other hand, things are improving. Revenues aren’t falling as fast; occupancy is ticking up. The dividend yield is 5.6% and it’s now paid in cash. The stock sells at a measly $10.75.

In the other corner, we have Apple, a corporate powerhouse. Rich in cash, with huge and consistent sales and earnings growth, and a brand new shiny dividend, instituted in mid 2012 (Apple did pay a dividend back in the ’90s, but it was eliminated when the company nearly went under.) With the right mix of hardware and software, Apple has captured hearts all over America, resulting in long lines outside its retail stores when new products are launched, and a stock price in the stratosphere, at over $500 per share.

Which stock has done best over the last year?

The first stock, Lexington Realty, has outperformed Apple’s stock by about eighteen percentage points. LXP is up 32% over the last year, while Apple is up 14%. That doesn’t include the hefty dividend on LXP.

But that’s a cheat, you say. It’s easy to find a low-dollar stock that’s done well in this market. Ok, what about a mundane industrial stock, like Illinois Tool Works? ITW makes everything from fasteners and solder to putty. It has been around since 1912 and has never been thought of as glamorous. It has edged Apple out of the ring by rising just shy of 20% over the last year. It sells at $61.87 today.

The more interesting fact is that if we run longer historical numbers, Lexington outperformed Apple from about 1994 through early 2005 when finally Apple pulled ahead. ITW bested Apple from about mid 1987 through early 2008; then Apple surged. Fact is, the wondrous performance by Apple has been recent, boisterous, and incomparable to any other time in the company’s history.

We’re not here to bash Apple. Our point is only that performance need not come from the most popular companies on the planet. It can come from overlooked stocks that make necessary items (no, the iPod is not a “necessary item”) or own useful assets. And sometimes, the performance from these boring stocks comes with much less drama to boot.