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Shares of Apple Inc. rose about 10% in premarket trading Wednesday, a day after the company posted robust growth in fourth-quarter profit and strong sales of its new 3G iPhone.

For its fourth quarter, Apple (stock quote: AAPL) said it earned $1.14 billion, or $1.26 a share, on revenue of $7.9 billion, up from $904 million, or $1.01 a share, on $6.22 billion in sales in the same period a year ago. The results beat the earnings estimates of analysts surveyed by FactSet Research, who forecast Apple to earn $1.10 a share on revenue of $8.02 billion.

Apple also exceeded its own estimates for a profit of $1 a share on $7.8 billion in sales.

Apple said that when adjusting to eliminate the impact of subscription-based accounting related to certain products, it would have earned $2.44 billion on $11.68 billion in sales.

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Our friends of The Big Picture published an interesting relase on 10 bullish charts, signals, indicators, that all indicate that the bottom is in or very proximate.

All these suggest to us that we are increasingly close to a bottom that can be purchased for an upside trade of 20-30% from these levels.

1. Relative Strength Indicator, SPX, 1928-2008

Ever since the beginning of the S&P500, the RSI’s monthly indicator has only dropped below 30 on four occasions: 1929, 1973, 2002, and 2008.

All 3 prior instances were very close to lows.

2. SPX Losses

The S&P has given up nearly the entire gain from the 2002-03 period to the October ‘07 highs.

This is a major correction that, like the many trading rallies in the 1970s, should set the stage for the next leg up.

Note that these were not buy and hold rallies, but 6 - 18 month trades.

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At the beggining of this week, financial company Merrill Lynch (stock ticker: MER) decided to upgrade Microsoft (stock quote: MSFT) to buy and set a price objetive of $30 in one year. This price is quite consevative as MSFT´s upside is huge, so it wouldn´t surprise me to see Msft´s share price go above $32,50 in a year, more than a 20% gain.

Here are some reasons of why Microsoft was upgraded:

Unparalleled ability to boost EPS growth with buybacks MSFT has unparalleled ability to strengthen EPS growth with the recent $40bn buyback. Under the base case (assuming buybacks over 5 years), our current FY09 GAAP EPS of $2.15 could go to $2.17 (+16% y/y) and FY10 could go to $2.40 (+11% y/y) from $2.36. This is assuming $8bn in annual buybacks for FY09 and FY10. If MSFT executes the buy back over say two years ($20bn/yr.) EPS accretion could be more meaningful at $0.07 in FY09 (EPS of $2.22, +19% y/y) and $0.24 (EPS of $2.60, +17% y/y) in FY10. Still has flexibility for large strategic deal and OSB spend MSFT generated $18bn in free cash in FY08 and with $20bn estimated in FY09. The buybacks and higher quarterly dividend of $0.13 will preserve the flexibility for large deals and/or Capx in Online Services (OSB). Assuming $8bn/yr. buybacks and higher dividends, MSFT would have a strong net cash position — $34bn and $44bn in FY09E and FY10E. Assuming a $20 bn/yr. program over two years, the net cash position will be $22bn and $20bn in FY09 and FY10. Long term challenges still remain Stepping up OSB investments is the right move since the potential market is as large as the core business. However, the inflection point to critical mass is unclear. The timely launch of next major product cycles (Win 7 and Office 2010) with more favorable reviews and profitability in EDD are other considerations.  Read the rest of this entry »