Apple Inc has generated a lot of buzz recently with the hype over its latest geek-chic techno status symbol – the Tablet.

But is that hype really over-hype? Is Apple, and more important for investors – apple stock, going to benefit from this new gadget?

I personally don’t think so, and neither does Jeremy Glaser at Morningstar.com.

Apple stock looks overheated. Sure the loyal Apple fans will run out and buy the tablet because their social status depends upon it, but are they likely to have more demand than that? In this greatest of recessions, are people going to not only shell out big bucks to purchase the tablet but then pay to read book and newspaper content they can currently get online for free?

This just seems like another Kindle – another attempt to produce a new piece of technology to revolutionize our lives. But the technology that truly revolutionizes how we do things is typically never planned to do so, but rather happens by serendipity.

Besides, the tablet has been hyped for so long now, it’s already priced into the stock so the upside is limited.

Mr. Glaser goes on to argue that the market in general is over valued anyway, and so Apple is already close to fair market value and hence carries limited upside potential. Of course, that’s a value-oriented approach and many investors in the market today are focused on growth, so in the short term Apple may get a bit of a pop.

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There’s a lot of uncertainty in the air over policies being proposed in Washington D.C. these days, and one of those policies with huge potential to affect business (and hence stocks) is the so called Health Care reform bill.

While it’s impossible to say for sure what the exact effect of a government take over of the health care industry would be, SmartMoney suggests that these 3 stocks are at least worth considering since they are more dependent upon larger health care trends than what Washington decides.

McKesson Corporation (MCK)

McKesson Corporation provides supply, information, and care management products and services for the healthcare industry. The corporation encompasses two divisions – Distribution Solutions and Technology Solutions. The Distribution segment distributes proprietary drugs, surgical supplies and equipment, and health and beauty care products to North America as well as providing consulting and outsourcing services for biotech and pharmaceutical manufacturers.

The Technology Solutions segment provides software solutions for clinical, patient care, financial, supply chain, and strategic management. It also provides software for pharmacy automation for hospitals as well as clinical auditing, and compliance management software.

McKesson is headquartered in San Francisco, but serves home care providers, physicians, hospitals, and retail pharmacies in North America, the U. K. and other European countries, and Asia.

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Teva Pharmaceutical Industries (TEVA)

Headquartered in Israel, Teva Pharmaceutical Industries develops and produces generic and branded pharmaceuticals, active pharmaceutical ingredients and biogenerics worldwide. R&D efforts are focused on therapies for diseases like multiple sclerosis, cancer, Parkinson’s and autoimmune diseases. Teva’s product list includes Copaxone and Azilect for treating MS and Parkinson’s disease. Through its acquisition of Barr Pharmaceuticals Inc., Teva added pharmaceutical products for women’s health to its list.

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Rehabcare Group Inc. (RHB)

RehabCare Group is headquartered in Missouri and provides rehabilitation program management for hospitals, outpatient facilities and skilled nursing facilities in the United States. These program management services are specialized for rehabilitation from strokes, orthopedic conditions, and head injuries,cancer, heart failure, burns, and wounds. Rehabcare Group owns and operates five long-term acute care hospitals and six rehabilitation hospitals.

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These stocks provide a nice diversification into the medical supply side, pharmaceuticals and long term care. Each of these healthcare segments is poised to experience signifiant growth as boomers continue to age.

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Best Buy (BBY) should be a slam dunk buy right now, right? When you consider that many of their competitors, like Circuit City, have been sent to bankruptcy when the economy tanked, their strong brand identity and Geek Squad service you’d think they’d be sitting in the center of pretty big economic moat. But that may not be the case any more.

As this article from Morningstar shows, there may be more dark clouds than silver linings on the horizon for Best Buy.

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4 threats to Best Buy’s economic moat.

Here is a brief outline of the 4 threats as presented in the article. If you find any of this interesting, I suggest that you read the full article.

The Looming Threat of Competition

As mentioned previously, one would think that competition wouldn’t be a threat with the demise of Circuit City, but as the article explains, the constant technological innovation and rapid product commoditization means that the defining differential between products is price. Furthermore, consumers have more brand loyalty than channel or store loyalty. All this means that consumers are free to shop around for the best deal on their preferred brand of consumer electronic. This has led to the emergence of new competition from the likes of Wal-Mart, Target, Costco and Amazon; retailers not often thought of as electronics stores.

Potential Shift in Electronics Distribution

In response to the dwindling channel loyalty, Morningstar sees an increase in manufacturer retail channels, like that of Apple. By having their own retail outlet, consumer electronics manufacturers can showcase their products without competition, which should in turn lead to greater brand loyalty. Moves like this essentially cut out the middle men, like Best Buy.

Threat of Digital Distribution

Best Buy has formed a partnership with digital distribution providers in the hopes of capitalizing on the digital delivery trend, but the folks at Morningstar are not sold that this will be enough to compete with established players like Netflix and Apple iTunes.

Services Provide Advantage but Can Be Replicated

Although Best Buy’s Geek Squad is a good brand, consumer electronics are more and more commoditized, making customers less loyal and less concerned with servicing. Once a consumer electronic becomes cheap enough, it’s easier and more cost effective to buy a replacement than pay to have it serviced.

Conclusion.

Don’t Be Fooled by Short-Term Improvements

Morningstar sees Best Buy as having much to recommend it for the short term, but sees those benefits diminishing as time progresses. But, much is unknown owing to the ever evolving nature of technology, so it is perhaps best to keep on eye on Best Buy. Also, stay abreast of possible silver linings like Best Buy’s international growth prospects and its partnership with Carphone Warehouse.

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I came across a quote by Jim Rogers in SmartMoney magazine yesterday that almost made me blow my chocolate milk out my nose when I read it. In this interview, Mr Rogers says:

“Diversification is something that stock brokers came up with to protect themselves, so they wouldn’t get sued. Henry Ford never diversified, Bill Gates didn’t diversify. The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket. You can go broke diversifying. Ask anyone who’s diversified in the last three years. They’ve lost money.”

I couldn’t believe that SmartMoney printed this quote without clarifying the dangerous implication therein.

Specifically, that more people have lost more money by not diversifying. Just ask yourself, who is engaging in the riskier behavior: The individual investor who’s put most of his money into 5 stocks, or the one who’s invested his money in 5 broad-based mutual funds? Both investors have full time careers that are not related to finance and take up too much of their time to allow them to become stock picking pros.

Clearly, there is a higher likelihood that the investor who’s chosen 5 stocks will lose more of his money that the investor who’d diversified.

The problem with all of this is that Jim Rogers is right.

Bill Gates and Henry Ford are bad examples, because the basket that they put all their money in was their business, and we’re talking about investing not being an entrepreneur.

But if you substitute someone like Warren Buffet in place of Gates, then you have a solid point. Warren Buffet does not diversify. He’s famous for concentrating his assets into relatively few holdings. But here’s where the analogy or the process breaks down – Warren Buffet knows what he’s doing. Warren Buffet makes investing his life. Warren Buffett knows how to fairly value a company and its stock, and he knows how to profit on the difference between the fair market value of a company and the current market value of its stock. Most individual investors are nowhere near Warren Buffet’s level of business and investing acumen. Many don’t even want to put the kind of effort in that is required to reach his level of expertise. And that’s fine – provided they don’t think they can still invest like him.

And that brings us full circle to the problem of SmartMoney not calling Jim Rogers on his quote.

The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket.

Most individual investors simply don’t know how to “make sure” they have the right basket over the long term.

I’m sure Rogers said it to get noticed, generate some buzz about himself and garner scandalous attention. That’s fine. But where is SmartMoney, or Business Week? Both publications interviewed him and neither felt the need to comment on his statement about diversification.

It’s a shame really, because the quote is only part of a much larger interview at BusinessWeek. I recommend reading the entire interview because he has some very interesting points to make about commodities and the Chinese and US economies.

I just wish the magazines would have provided some cautionary counterpoint to the controversial diversification quote.

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Here’s a head’s up for anyone holding these stocks – Fair Isaac, Boyd Gaming and Great Atlantic & Pacific Tea Company (A&P). A recent SmartMoney article has hilighted these 3 stocks as having garnered more “sell” recommendations than “buys” in recent weeks.

Fair Isaac (FICO)
Fair Isaac’s performance is dependent upon consumers using credit, and spending money. Since the recession struck in 2008, consumers have done little spending and even less borrowing.

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Boyd Gaming (BYD)
Boyd Gaming owns Casinos in big gambling towns like Vegas and Atlantic City. The company has a high debt load, and people aren’t flocking to Vegas (its largest market) like they did two years ago. Sales fell 14% last year and are expected to fall another 7% this year which make repaying that debt a long road.

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Great Atlantic & Pacific Tea Company (GAP)
A.K.A. the grocer A&P. While the company hasn’t turned a profit in more than 2 years, and halted its dividend in 2000 the stock price has more than doubled since the summer. The reason appears to be speculation of a potential merger. Merger talks seem to be fading fast, and there’s not much else to recommend this stock.

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By now, we now the sad story of the large national investment banks like Bear Stearns, AIG, Citigroup et. al.. Such examples give pause to investors, as they should, but they also taint the entire financial sector.

Believe it or not, there are many banks that stuck to lending and banking principles and never ventured into derivatives and toxic assets. Shares in these banks, usually small, regional banks, have taken a hit. Call it guilt by association. It’s unfair, but it creates great opportunity for investors who can stomach the kind of volatility that often accompanies such subjective discrimination.

Here are three smaller banks, recently recommended by SmartMoney magazine.

Provident Financial Services (PFS)
Provident is a well run, new jersey bank with a solid balance sheet and enough cash on hand to ride out the current recession. Provident has 82 branches and only 1.5% of their loans are “nonperforming”, which is well under the industry average. The stock trades at 1.1 times the tangible book value, which is cheap for any sector.

City National (CYN)
City National is located in Beverly Hills, CA and caters to the affluent (think high-end Hollywood). Analysts expect earnings to rise sharply in 2010. They currently have $28 billion in assets, and $13 billion in deposits. Though the price has fallen 26% on worries of exposure to California’s pummeled real estate market, analysts say that the bank has high quality assets and earnings should “rise significantly.”

TCF Financial (TCB)
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Introducing the “new, pragmatic approach to energy investing” (as it is called by SmartMoney) – also known as the having it both ways approach. It’s a new way to invest in energy stocks, and it mimics what the big oil companies themselves are doing. It’s a hedge, really.

It’s investing in the traditional energy supplies like coal and oil as a core to the portfolio, while also adding alternative energy like solar, wind and biofuel to the mix.

The U.S. Energy Information Administration projects fast growing economies like India and China will help drive energy consumption up by 33% by 2030. This will also drive up research into green and renewable energy sources, but it will also push the price of oil up to where it will be profitable to tap the harder to drill wells and process the more costly oil shale supplies of Canada – hence the hedge. Fossil fuels aren’t going away anytime soon, but they also won’t last forever.

Here are 5 energy stocks that should benefit from the new and old sources of energy.

Schlumberger (SLB).

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This Houston based oil services firm helps customers like Exxon Mobil improve their efficiency in finding and extracting oil. Schlumberger gets nearly 75% of its $27 billion in annual sales from customers outside the U.S., so it’s also a nice foreign investment play. It’s active in operations off the west African coast as well as Russia.

Drilling fell nearly 60% in the U.S. and 30% in Russia when the recession hit, so it’s not a short term hold by any stretch, but it’s a good long term buy and hold opportunity. The cost of energy is only going to go up in the future, which is why many analysts say that Schlumberger’s long term potential far outweighs the short term challenges.

Apache (APA).

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Natural gas prices fell 75% when new reserves of gas came into the market, and while this may be good news for consumers it’s not so good for Apache, who gets more than half its income from natural gas.

But natural gas is only half the story. While natural gas is not expected to hit it’s all time high again anytime soon, oil has rebounded quite a bit from it’s near $30 per barrel low. Apache’s plan is to only drill when oil is $40 or more a barrel, and search for gas when it’s at least $4.50 per million BTUs. Not surprisingly, Apache is spending much of it’s focus on oil these days.

Analysts say the company has a long term record of boosting production through acquisitions and operating efficiencies. As Ben Halliburton, chief investment officer of money manager Tradition Capital says, “They do a great job blocking and tackling.”

First Solar (FSLR).

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Even though demand for solar energy worldwide is expected to be flat for this year, and even though the world is gripped by recession, this maker of solar panels expects earnings to soar 70% this year, and sales to increase 55%. Not too shabby.

Despite the buzz around green, renewable energy, solar energy is only a blip on the global energy radar. That means that if solar energy can become cost effective, there’s a lot of room for growth.

Some analysts expect demand for solar energy to grow more than 40% as the recession ends and governments continue to favor clean energy with grants and subsidies.

To ready itself for this anticipated growth, First Solar plans to double its production and manufacture enough solar panels to provide 1,000 megawatts of electricity.

If all this research and anticipation pans out, this would give First Solar an edge against any competitors.

Telvent (TLVT).

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Telvent provides traffic management and other services to improve efficiency in energy and transportation industries. Efficiency is seen by some analysts as the low-hanging fruit of the push for cleaner, greener energy. This makes sense, because it’s easier to cut costs than increase revenue.

The massive $787 billion government spending bill passed by congress in February included $4.5 billion for building a “smart grid.” The smart grid makes use of technology and services provided by companies like Telvent to increase the efficiency of energy transmission.

Telvent’s client base includes utilities and governments around the world, and they hope to get a large part of the smart grid projects. The company headquarters were moved from Madrid to outside Washington, D.C. last year, which probably won’t hurt their bid for federal projects any.

Massey Energy (MEE).

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Last up on the recommended energy stocks on this list comes from America’s often battered coal industry. Demand for coal is down, and competition from natural gas is up and Washington has made the coal industry second only to “Big Oil” on its energy enemies list. All of this factors into coal stocks being all but left for dead.

So why is a coal company like Massey Energy on a list of recommended stocks?

In a word, opportunity.

All those negatives have beaten share price down so far that there is a potential for huge return. Despite its status in Washington, coal remains one of the cheapest and most abundant sources of energy and still powers half of the U.S. electric output.

Massey is the nation’s 4th largest coal producer and the largest coal company in Central Appalachia.

Regardless of the ideals of the green energy movement, America is not likely to wean itself from coal for more than a decade at the earliest and Massey Energy is poised to reap the rewards for the time being.

• Healthcare Stocks Ripe for Growth: MEDICAL RECORDS. This is a continuation of the Healthcare Stocks Ripe for Growth series this week. Yesterday, I profiled the Biotech company Gilead Sciences. This week is the medical record keeper, Quality Systems. Quality Systems (QSII) Regardless of whether the Obama administration gets public healthcare legislation passed, one thing you can count......
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This is the 3rd and final installment of the Healthcare Stocks Ripe for Growth series.Yesterday was medical records processor, Quality Systems and the week before that was Biotech company Gilead Sciences. This week we finish the series with a supplier of robo-surgery equipment, Intuitive Surgical.

Intuitive Surgical (ISRG).

Intuitive Surgical is an $875-million-a-year business that produces the da Vinci Surgical System which let surgeons operate by manipulating robotic arms while seated at a control console. The robotics allow for a more precise procedure, resulting in smaller incisions which result in less physical trauma to the patient and faster recovery times. All of that means lower costs as well.

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While the share price of Intuitive Surgical has fallen from its recent high due to concerns over hospital buying power during the recession, the 2nd quarter profits were 22% higher than the previous year.

Competition.
What competition? Intuitive Surgical acquired their only rival in 2003, producing a de facto monopoly. De facto because there isn’t anything keeping new competitors from diving in, except the startup costs. But in the meantime, the lead time Intuitive Surgical a big head start on building market share.

Growth story.
The da Vinci System is primary used for prostectomies and hysterectomies currently, but it’s a relatively new technology. So as doctors gain experience with robotic surgery and the systems gain acceptance in the healthcare community, other types of procedures will be added.

Income.
Intuitive Surgical generates a lot of cash from sales of accessories and replacement parts for its 1,100+ systems. Each machine generates between $100,000 to $150,000 every year. Almost half of the company’s 2008 revenue was from these recurring costs, and that percentage continues to rise. This, coupled with 0 debt and $902 million in cash, makes it a solid company with high growth potential.

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This is a continuation of the Healthcare Stocks Ripe for Growth series this week. Yesterday, I profiled the Biotech company Gilead Sciences. This week is the medical record keeper, Quality Systems.

Quality Systems (QSII)

Regardless of whether the Obama administration gets public healthcare legislation passed, one thing you can count on is a bigger focus on improving healthcare technology and efficiency. In fact, $29 billion of the $787 billion spending plan enacted by congress shortly after the president’s inauguration was earmarked specifically for such healthcare improvements.

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The growth story.
It’s no surprise that since then, Quality Systems has risen in price about 63%!

Given that kind of run up in price, it’s likely that a large amount of the return has already been realized, but it is still a solid company in a growth sector. Anyone who’s been to the doctor’s office and seen the wall of folders housing patient records knows that there is still a lot of information yet to be digitized.

Quality Systems is one of the big players in the fledgling industry and is therefore in a good position to capture a large market share and benefit from the government’s efforts to cut medical costs and increase the use of technology.

In good shape, financially.
The financial’s seem to be in good shape as well. The are already profitable, have a 30% profit margin, no debt and $78 million in cash. The stock also sports a $1.20 annual dividend, about 2.3% yield. Analysts expect profits to grow 11% for 2009, and 30% for 2010 – and that’s before the bulk of the money from tax payers kicks in.

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Healthcare may not seem like a great investment right now, with all the talk of a government take over of the industry, but sometimes those are just the times that create great contrarian opportunity.

Today, I’m profiling 3 healthcare sector stocks that show promise of growth in the coming years, regardless of the decisions in Washington D.C..

If you’re looking for some growth stocks in the healthcare sector, then these may be just the ones. Just be sure to do your due diligence and homework before you buy. This is presented for general informational purposes only.

First up is a biotech stock, Gilead Sciences.

Gilead Sciences (GILD) has managed to make weather the recession quite well so far, and has managed to maintain much of its profits. It may be due to the fact that GILD specializes in HIV pharmaceuticals, and many of their customers need that medication to survive.

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The company posted 31% profit increase for Q2, 2009. This increase was due mostly to Truvada and Atripla, which are once-a-day HIV treatments. Those two pharmaceuticals alone contributed $3.7 billion in sales last year, which is almost 72% of Gilead Sciences’ total sales.

Gilead has a serious economic moat as well, since they own 71% of the U.S. HIV drug market. They are on track to grow sales even more once Atripla is approved for European markets.

Diversification.
Gilead is taking steps to diversify through acquisitions of other pharma companies. They acquired CV Therapeutics (maker of a chronic angina treatment) and Myogen (maker of Letairis, a hypertension treatment) in the past two years. With these acquisitions alone, Gilead now has a presence in the cardiovascular drug market.

On solid ground.
Even after those acquisitions, Gilead Science still has almost $2.9 billion in cash. It also has a development pipeline and no soon-to-expire patents, something some larger pharma companies are struggling with.

The stock currently trades around 18 times this year’s expected earnings.

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• Healthcare Stocks Ripe for Growth: MEDICAL RECORDS. This is a continuation of the Healthcare Stocks Ripe for Growth series this week. Yesterday, I profiled the Biotech company Gilead Sciences. This week is the medical record keeper, Quality Systems. Quality Systems (QSII) Regardless of whether the Obama administration gets public healthcare legislation passed, one thing you can count......
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