From Sean Goldsmith in the S&A Digest:

Technology darling Apple just announced a 50% earnings increase to $3.38 billion for the fiscal first quarter - the single most profitable quarter in its history. Revenue increased to $15.68 billion from $11.88 billion. In the quarter, Apple sold 8.7 million iPhones, up from 4.4 million a year ago (but still below analysts' expectations of 9 million). The image below shows the explosive growth in iPhone sales:



Apple also sold 3.4 million Macs, 33% more than a year ago. The company saw a decline in iPod sales... "only" 21 million units sold in the quarter, down 8% from a year ago. And tomorrow, Apple will unveil "a major new product that we are really excited about," said CEO Steve Jobs. Most people expect the new product to be a touch-screen tablet that will offer limited computing capabilities and allow users to read books and periodicals - essentially an enlarged iPhone.

Apple is trading near all-time highs - $215 a share, which it hit January 5. Much of the good news surrounding the "mystery product" is already priced into the stock. Apple shares trade today at about 18 times all-time peak free cash flow. So while Apple may continue producing steady earnings, it will be difficult to make any blockbuster gains buying the stock (the company's market cap is nearing $200 billion).

But if you can find a small company that sells component parts to Apple, the tech giant's growth could mean a double or triple in a smaller firm's bottom line. Investing in that smaller stock can make you two to three times your original investment. Penny Stock Specialist editor Frank Curzio calls this investment strategy "hitching a ride." It's one of the many ways he finds huge winners in the "under $10" universe.

Crux Note: The S&A Digest comes free with a subscription to Frank Curzio's Penny Stock Specialist. Frank recently discovered a small company that just started producing an integral component for Apple's iPhone. It currently trades around $6 per share, but as Apple continues growing, this small technology company's stock will explode. To learn more, click here.

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