A common question I hear asked is whether Apple is destined to follow in Microsoft\u2019s<\/b> (<\/span>MSFT<\/a>)<\/span> footsteps, suffering years of underperformance.\u00a0 Microsoft, like Apple, once held the distinction of being the most valuable company in American history.\u00a0 (And adjusted for inflation, Microsoft\u2019s 1999 high-water mark still holds the title.)\u00a0 \u00a0Today, Microsoft\u2019s share price is still 40% below its dot-com-era peak\u202613 years later.<\/p>\n Ouch.<\/p>\n There are certainly some similarities.\u00a0 Both companies were dominant in their respective areas of expertise: Microsoft in PC operating systems and office productivity software and Apple in smart mobile devices.\u00a0 Both companies were led by brilliant technology visionaries in their heyday, and now both are led by less-imaginative \u201ccompany men,\u201d at least until Steve Ballmer\u2019s replacement is announced. \u00a0And both, once they grew to a certain size, found their markets mature or close to maturity with fewer obvious avenues for growth.<\/p>\n But there is one major<\/i> difference between the two stocks: valuation.<\/p>\n In 1999, Microsoft\u2019s valuation had reached absurd, nosebleed levels that were (<\/span>sadly<\/a>)<\/span> typical for the time.\u00a0 Microsoft peaked with a trailing price\/earnings ratio of over 70 and a price\/sales ratio of over 20<\/a>.<\/p>\n We\u2019re talking about the peak of one of the greatest stock bubbles in history.\u00a0 From those levels, Microsoft was doomed to years of stock price correction, regardless of how successful the company operationally.\u00a0 Ballmer can be faulted for missing the boat on the mobile revolution and for a generally sloppy history of acquisitions over his tenure.\u00a0 But Microsoft\u2019s stock underperformance since 2000 is a product of an unrealistically high starting price.<\/p>\n Let\u2019s now take a look at Apple.<\/p>\n Apple is peculiar because its trailing price\/earnings ratio and price\/sales ratio actually trended downward<\/a> throughout its meteoric rise in the mid-to-late 2000s.\u00a0 At its peak last year, Apple traded hands for 13 times trailing earnings; hardly a bubbly valuation by any standard.<\/p>\n What does this mean going forward?\u00a0 Is Apple destined to become the next Microsoft?<\/p>\n If we\u2019re talking about the share price, I would say no.\u00a0 Apple\u2019s shares trade at a steep discount to the broader market, and the company is aggressively raising its dividend.\u00a0 Though Apple is no longer the growth story it once was, it\u2019s a profitable company with a cheap stock.<\/p>\n If we\u2019re talking about shareholder friendliness, then I legitimately hope Apple follows the path of Microsoft.<\/b>\u00a0 Microsoft has raised its quarterly dividend from $0.08 per share in 2003 to $0.28 per share today.\u00a0 A similar move by Apple would represent the greatest transfer of wealth to investors in history.<\/p>\n Microsoft has also reduced its share count by 23% since 2005<\/a> and plans to aggressively continue its share buybacks in the years ahead.<\/p>\n As an investor, you cannot control the future direction of the market. \u00a0But you can<\/em> control the price you pay. \u00a0And today, both Apple and Microsoft are reasonably-priced stocks with a high probability of seeing continued dividend growth and share count reduction.<\/p>\n Charles Lewis Sizemore, CFA, is the editor of the\u00a0Sizemore Investment Letter<\/a>\u00a0and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long MSFT.\u00a0Click here<\/a>\u00a0to learn about his top 5 global investing trends and get your copy of \u201cThe Top 5 Million Dollar Trends of 2013.\u201d \u00a0This article first appeared on MarketWatch<\/a>.<\/em><\/p>\n This article first appeared on Sizemore Insights as Is Apple Going the Way of Microsoft?<\/a><\/p>\n![\"MSFT](\"http:\/\/charlessizemore.com\/wp-content\/uploads\/2013\/10\/MSFT-PE-300x189.png\")
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