Apple is probably the best business competitor in the world. And when you win, eventually you will have to deal with anti-trust accusations, much as Microsoft dealt with in operating systems in the 1990s. Anti-trust actions are famously difficult to prove, but I think in the coming years you'll hear more about it with Apple because it controls huge amounts of business.

I wrote about this a couple weeks back on Investor Uprising, but I thought it would be good to summarize what about Apple makes it so dominant in the market... for, well, everything.

Apple, after all, is not just growing in one segment. It's actually taking huge chunks of profit  out of entire industries.

Apple also enjoys fatter profit margins because of its vertically integrated model -- which has come at the expense of telecom providers who must subsidize customers' never-ending thirst for iPhones and iPads. It also allows Apple to build in excess profits into components such as chips, because it can charge a premium.

 Let's just look at some facts about Apple's dominance.

• Apple has single-handedly boosted the stock market. Bloomberg tells us that Apple alone has accounted for 8% of the S&P 500's rise since the 2009 bottom. And Barclay's analysts recently pointed out that Apple has had an outsized influence on the markets, accounting for 15% of the growth in all of the S&P's rise this year. They estimate Apple contributed four times its weight to the index by having outsized profits. So maybe the government should launch an inquiry into Apple controlling the stock market.

   

• Apple's profits account for most of recent profit growth. According to FactSet research, if you subtract Apple's earnings from the market in the fourth quarter 2011, profit growth for all of the S&P 500 was -1.6%. With Apple profit growth added back in, overall profit growth was flat. That's right folks -- without Apple, there would be no growth in profits. It alone accounted for all of the profit growth in S&P 500 in the last quarter last year, and FactSet expects Apple to the be the largest source of earnings growth in Q1 2012.

   

• Apple leverages major telecoms through subsidies. The retail price on a new iPhone can be as high as $600. A telecom carrier will sell it to you for $199. Think about Apple's core sales channel: telecom operators. Apple has so much leverage that it can largely dictate the terms in these relationships so that telecom operators subsidize sales of its devices.

  In extreme cases, such as the deal with Sprint, the subsidy is a simple transfer of wealth from carrier to Apple. Sprint tagged its subsidy expense at $1.7 billion, up from $1.2 billion a year earlier. Some analysts predict this can't last, that Apple has to give back more of its profits to carriers. But Apple's immense leverage means it can dictate the terms.

• Apple is taking over all of retail electronics. Blog site Zero Hedge recently calculated that Apple's market capitalization now surpasses that of the entire retail industry. How is this possible? Well, as i-devices have added functionality such as music, communications, and video, they have eliminated entire segments of the industry. Maybe this is contributing to Sony's recent woes. Once you have an iPad, you need a portable DVD player?

   

• Apple's winning the smartphone profit battle. Though it's having a see-saw battle with the Android-powered mobile phones and can't quite gain majority market share, Apple recently gained some share back and now represents 43% of the smartphone market to Android's 53%, according to the NPD group. But more importantly, Apple makes more money in this market. Keep in mind that Google does not profit on Android directly because it gives its operating system away for free to phone manufacturers, whereas Apple controls its own manufacturing from the Operating System (OS) to the memory chips. Apple's model results in more profit, because it can charge more for all of the components in its product, including the OS. Even though it's not winning top market share, Apple is winning on profitability.

   

• Apple controls digital music. Remember the music industry? Apple's influence and control of digital music is still growing. It now accounts for 69% of all digital music sales. Amazon is a distant second with 8 percent, according to the NPD group. Apple's growth in digital sales means it now serves up about 25% of all music units, which includes physical units (even though Apple sells no physical music units), according to the NPD group. That's up from 14% in 2007.

I think that Apple's growing power and dominance in a number of industries is likely to be a topic for trade regulators for some time. The regulators have plenty of areas to mine, most notably Apple's control of the relationships in the telecommunications sales channel.

Will they make any progress? It may take years and years, but eventually you may see more legal action against Apple in the realm of anti-trust actions.

Don't get me wrong: I think Apple earned the control of markets that it has. It has better products, and it's a better company. We're also not crying because Apple is one of the leading components of our IU25 Index, which is up 35% in one year.

But it's not just about e-books. Apple's immense control now extends to the broad range of the entire business universe.

Our screening system has delivered some great stock ideas over the years. Our screen looks for leading companies whose valuations are reasonable in relation to growth rates and Return on Equity (ROE).

Here's an example from February 11, 2010 -- in which I said Microsoft, Apple, Sybase, and Gulfmark Offshore were buys:

Stock Buys for the Baklava Bailout.

Solid picks from two years ago. Sybase was bought at a 40% premium, Apple has doubled, Gulfmark is up 40%, Microsoft is up about 15% and has paid you a 3% dividend all along.

I frequently publish these screens and send them to readers and friends. Their first instinct is to analyze every pick. "But isn't Microsoft shrinking Windows deployments?" Don't do this. The point of a screen-based portfolio is to follow the computer and ignore your more likely faulty human logic.

Even if you have sector-specific "knowledge," it can be damaging to use it. The numbers don't lie. Often when companies are cheap it just means they are cheap, and then suddenly somebody buys them. This is exactly what happened with Sybase just three months after it made my screen.

Look at Apple. How many people underinvested in Apple? How many people tried to over-analyze whether they could expand another market, like Pad computing? The stock has been cheap for six years. It's still cheap -- currently trading at a forward P/E of 12.

Enough said. Here is the new screen, which I have published on Investor Uprising in our new Market Report. 

Disclosure: I currently own Buffalo Wild Wings and I am looking to acquire more of these stocks over time. Positions can change at any time.

Table 1: Our Stock Shopping LIst

Returned from CES last week. Slept for a couple days. Woke up. Tried to remember something that will change the world. Couldn't think of anything.

Here's a problem: CES is becoming like the old Comdex. It's like a giant star that's gotten too big and general and will soon Supernova and collapse in upon itself.

Here's another problem. Apple generates the most excitement, both form the technology and a investment perspective, in the mobile consumer electronics space. And Apple doesn't go to CES. So what you have is a gigantic hallway filled with 150,000 people trying to copy Apple.

What's more important is what Apple will do next. Apple will do a sleeker tablet with LTE connectivity. Apple will try to do TV -- again.

That being said, there was stuff to listen to. If you want a list of some potential future tech trends, I wrote about some futuristic stuff on Investor Uprising.

In terms of investment ideas, I believe that the place to look in mobile and consumer is in suppliers and chips, because clearly as devices multiply it opens up many chip markets for many players. Read my CES Investor's Guide on Investor Uprising.

I have become fascinated by Acai, even though I can still not pronounce it correctly and I won't even bother trying to figure out how to print it with the accent which I can't find on my computer keyboard. I'm an admitted latecomer to the trend. Yes, it's old news. But it's still a good story. The recent New Yorker article did a great job outlining the background.

The New Yorker article tells the tale of how two SoCal chums and University of Colorado grads (Go Buffs!) Ryan and Jeremy Black "discovered" acai in the Braizilian jungle and started marketing it in the United States, kicking off what would become one of the most potent health-food marketing booms in recent history, aided and abetted by none other than Oprah.

What I found interesting about the article is not so much about the controversy surrounding the health benefits of acai (like most debates, the truth lies probably somewhere in between), but the entrepreneurial spirit of the two Black brothers and their partner Edmund Nichols. The went to the jungle with a load of credit-card debt, locked in a long-term contract to sell acai through a Brazilian producer, and spent hundreds of thousands in the first year to ship Acai to the United States. Within two years they were doing half a million in sales and now they do $50 million. Quite an adventure.

The other story in acai is about marketing. How does an obscure jungle fruit go from being a locally enjoyed delicacy to a multi-billion-dollar global business in ten years? Savvy marketing. The blacks hooked into real-world health research and captured the Brazilian mystique. The more nefarious marketeers later leveraged Acai into online marketing scams. But both the legitimate companies and online scammers had something in common: They knew that consumers like a good story, and you can't get much better of a story than a mysterious berry coming out of the Brazilian jungle.

Here is an abstract of the article from the New Yorker (full article available only in print):

Silicon Valley startup ConteXtream (yes, the company name spelling is that silly!)  announced yesterday that it landed $14 million in Series B funding to go after a big problem in global networks: Virtualizing the management of broadband applications and content through data centers.

Here's the big picture: As the use of content and bandwidth-intensive applications such as movies, photos, social networking, and games explodes on mobile and wireline networks, service providers are having major headaches managing the bandwidth as well as allocating resources in the data centers to serve these applicatoins. ConteXtream's product, a software solution that loads on commodity PC hardware, adds "smarts" to the network delivery of these applications, allowing service providers to manage the resources on their data centers as a single virtualized "grid."

Well, the 3Par bidding war saga looks to be coming to an end as HP's final $33 offer has been accepted and Dell has pulled out of the race.

It makes you wonder about the "efficient market" theory, doesn't it? I mean, here is a stock that was trading around $10 and basically flatlined for about a year, only to suddenly increase by more than 300% in a period of three weeks. The market certainly wasn't efficient at pricing 3Par shares.

Here are the latest stats on 3Par at the current near-$33 level:

Market Cap: $2B

Forward P/E: 122

Revenue (TTM) $203M

Price/Sales (TTM): 9.84

Enterprise value/EBITDA: 294

Hmmm. Not sure I'd call that a bargain.

Onto the rest of the news:

• The Atlantic coast of the U.S. is prepping for Hurricane Earl (New York Times).
• Andy Roddick is out at the U.S. Open (Wall Street Journal). But the real reason to cite this story is because of this great line: "Andy Roddick’s early exit breaks the hearts of T.V. producers dependent on repeated Brooklyn Decker reaction shots"
• 3G Capital is acquiring Burger King (Wall Street Journal). Will that yield downloadable mobile burgers?
• Bernanke admits he "wasn't straightforward" on Lehman (Bloomberg). According to my thesaurus, here are some synonyms for being "not straightforward": dishonest, crafty, crooked, deceitful, evasive, fraudulent, oblique, shady, shifty, sly, surreptitious, tricky.
• Jobless claims decline (CNNMoney.com). Barely.
• Ten questions and answers on Apple TV (PCMag). Silliest uestion: Does Apple have a Twitter killer?
• In case you haven't refinanced yet, you might want to note the current 30-year mortgage is at 4.32% which is a new all-time record since records starting being kept in 1971 (did they not have mortgages before 1971?) (Wall Street Journal).
• Most interesting financial headline of the day: "I'm selling the house and piling the proceeds into Greek government bonds." (Telegraph)
• The verdict is in: People hate the new Digg (Mashable). Yes, I do too.

I'm a key influencer. I'm also a technology evangelist, analyst, and journalist. And I can also leverage core competencies. Uh-oh. Sick of me yet?

We live in a world of prototypes, buzzwords, hype, and cliche. That's why I think CIO has hit the market with an article on the "10 Loathsome Technology Industry Types."

Here's an excerpt:

Vendor Marketing EVP You've got great hair—and you know it. Every conversation inevitably returns to "synergistic opportunities for the brand" or "CSR initiatives." You've got an iPhone 4 and you're hip to Facebook and Foursquare. Your most recent and greatest idea (if you do say so yourself): "I know how we'll get potential customers' contact information: Free iPad Giveaway! No one else is doing it!"

Venture Capitalist Wait, wait, don't tell me: You're based in the San Francisco / Palo Alto area, right? Uh-huh. And you once worked for HP or IBM? Yes. You enjoy yachting and golf? You betcha. And, of course, don't forget about your passion for "fine wine." How unique.

The Influencer A relatively new moniker for the same old type of self-aggrandizing, undeserving attention whore of years past: You've probably referred to yourself as a "guru" or "visionary" before. But your "highly soughtafter" methodology for measuring your Twitter influence is a secret worth keeping close to the vest. Definitely.

Pretty good stuff. Go check out the full story at CIO.com: "Influence This: 10 Loathsome Technology Industry Types."

What's on my mind this morning? Litigation. Like, Paul Allen suing everybody. And everybody suing Facebook.

What's up with that? Has the economy gotten so bad that the world is looking to lawyers to boost buisness activity?

In other news:

Genzyme rejects Sanofi bid (Wall Street Journal)

Intel to buy Infineon's wireless outfit for $1.4B (CNN Money).

Blackberry gets a stay in India (BBC). Quick -- figure out how to let people spy!

HP authorizes $10B buyback (Bloomberg). Bidding wars, buybacks -- who needs all that cash, anyway.

Government to propose new fuel economy stickers (USA Today). They'll come with pretty new graphics! Yay, now that's what I call bureaucracy at work...

Most people don't want to be located (NY Times). Especially me. Right now.

Google plans pay-per-view films (Financial Times).

Cisco is reportedly trying to buy Skype before its IPO (TechCrunch).

Is there a more explosive economic concept than combining iProducts with China? Didn't think so. In that vein, MarketWatch reports that China Unicom starts to ship iPhone 4 in China next month.

Our mind is boggled by the concept of hundreds of millions of frenetic Chinese citizens roaming the fastest growing country on earth clutching iPhones and iPads.

On to the rest of the news:

The Internet advertising industry appears to be in denial about the growing momentum behind Internet privacy -- and it should start to prepare for more protection of data through global privacy legislation.

As I noted last week, the European Union is moving toward privacy policies, most notably with the "cookie directive" which would require all advertisers to obtain opt-in to place cookies in user browsers.  In addition, we are in the early stages of new privacy legislation in the United States which would introduce tighter Internet privacy.

All of these powerful new regulations are likely to put signficant pressure on Internet media, most notably the ecosystem of ad networks and data exchanges.