1. Apple's P/E is way to low for a company that literally sells the best and highest rated products on the market. Historically you pay a P/E _premium_ for these types of stocks, not a discount. The company is downright cheap.
2. ApplePay has a ton of potential. Just in the other news thread others were complaining that moving to chip & pin cards is basically just changing the fraud, not fixing it. ApplePay's tech passes the smell test, and the people who will be using it have expendable money.
3. The Apple Watch. Who knows how it will sell? I will say I am always impressed with Apple's design and polish and it's hard to picture a crappy product. Maybe it's a hit or maybe it just raises their bottom line, either way it's unlikely to drag on profits.
We'll see how it works out. These earnings include only 6 days of iPhone 6 sales... I worry about Apple in my portfolio probably the least compared to other stocks in the S&P 500. It pays a dividend for crying out loud! I have to remind myself not go over diversification rules...
> Apple's P/E is way to low for a company that literally sells the best and highest rated products on the marke
Nobody really cares of this. The price and P/E doesn't have to do anything with 'how good the products are' (well, not too much at least). What (essentially) matters is risk -- upside and downside risk. Apple looks quite safe at the moment with little upside risk (it's not probable that they'll suddenly double their revenue, but they make a lot of money) and not too much downside risk (very-very little probability of failure, but if something like the iPhone loses its profitability then there isn't really anything else to rely on).
Microsoft has exactly the same PE, but it's different. The upside characteristics are the same (not too probable that it's going to grow a lot), but the downside risk is different: Microsoft has many 'legs', it's very unlikely that a large part of their profit just disappears because of losing in one particular market segment, but it's quite likely that they will lose one or two profitable segments
The P/E is a quick proxy for the bond return. Lower the PE relative to reliable, conservative growth, the better the return.
High quality products mean it's unlikely they will release something that shoots them in the foot.
Microsoft, on the other hand, is constantly shooting itself in the foot financially -- from their danger based phones to the slate to the xbox (a lot of market share but also a lot of losses.)
Thus MSFT and AAPL having similar PEs shows that apple's PE is lower than it should be.
People have never believed in Apple, or never "got" it. This is why they thought it would fail without Jobs, they don't understand it.
this is why they discount it.
When they discount it, as measured by PE, this gives the investor opportunity.
1. The P/E is low because of the future growth potential. Investors don't think it can grow at this pace in the future. It's not like a Coca Cola which grew earnings consistently in the double digit percentages over decades.
2. ApplePay has a lot of potential, but not in terms of moving the needle in earnings anyway. A billion dollars here and there isn't enough for Apple to significantly improve earnings. The company is just too big.
3. Same as 2.
The market will price the stock according to the risk it perceives. If you think you know the business better than the market, only then trust your own analysis and declare the market to be wrong and your analysis to be right. That's what value investing is all about anyway.
I've always found the idea of diversification as a rule, or for its own sake to be troubling.
Say you have 100k. You could put it all in Apple, or put 99k in Apple and then buy puts to protect against a sudden decline in Apple with the remaining 1k. (might cost more, not sure.)
Or you could split it up into 6 companies. Are any of the other 5 going to be as high quality as apple?
I think diversification comes from the belief that you can't pick stocks so you might as well pick several and hope they work out on average.
I think that this is not so much the case when you spend a bit of time investigating. I've not found it to be the case, at least. (What I can't do is pick timing, but I can pick stocks, pretty reliably for 20 years or so.)
Right now Apple is at $100ish, and a Jan 2016 $90 put would cost $8ish.
This means that the most you could lose in that time period is %18 of your money... and that's assuming the company completely craters.... if it just drops to $90 because they multiply the dividend by a lot, you don't really care.
If, however, a nuke hits cupertino, you're covered.
I like that a lot better than guessing what Tesla will be at in the future. (I think Tesla is a good company, for instance, but the risk is orders of magnitude higher.)
> I've always found the idea of diversification as a rule, or for its own sake to be troubling.
I agree with you in general, but sometimes you get bit there too.
Back in 2007, I felt that the US economy was in trouble. So I thought I'd be smart and went the full diversification route in my Fidelity retirement portfolio: split it among market funds for different economies around the world. Eastern Europe seemed to be poised for growth, so some $$ there; China was ticking up, so that got some; same for Latin America, Canada and Asia.
But then guess what happened? US got jolted and recovered. But my diversified funds? Most of them are still below what I bought them for in 2007. Especially that f*cker "Mathews China Fund" ($MCHFX). FML.
I hold the opposite view for one reason: The iPhone itself.
With 85% of new phones running Android [1] I think it's only a matter of time before the 'app gap' tilts in Android's favor. At that point it will be game over for iPhone.
On a more personal note I have found my $420 Nexus 5 to be on par with an $869 iPhone 6 - and that can't be good for Apple's long-term financial health.
> On a more personal note I have found my $420 Nexus 5 to be on par with an $869 iPhone 6 - and that can't be good for Apple's long-term financial health.
FWIW, I made the exact same switch as well -- Nexus 5 to iPhone 6 -- and I definitely prefer the iPhone.
I don't know who in the world would want to own AAPL at 20x earnings. They're one big breakthrough by Samsung or Google (or whomever) from having their revenues cut by 90%.
Because Samsung is an immensely diversified company that makes everything from washing machines to apartment buildings. Phones are big part, but just a small part of the overall company.
Why don't you do a little math for all of us instead of providing smart remarks?
What percentage of Samsung's yearly revenue is smartphones? Is that a large part or a small part of their revenue?
What would a 90% drop in Samsung's smartphone revenue do to their overall revenue? Would that be 90% of Samsung's overall revenue or some smaller number? What's that number?
Is that a large part or a small part of their revenue?
1. Apple's P/E is way to low for a company that literally sells the best and highest rated products on the market. Historically you pay a P/E _premium_ for these types of stocks, not a discount. The company is downright cheap.
2. ApplePay has a ton of potential. Just in the other news thread others were complaining that moving to chip & pin cards is basically just changing the fraud, not fixing it. ApplePay's tech passes the smell test, and the people who will be using it have expendable money.
3. The Apple Watch. Who knows how it will sell? I will say I am always impressed with Apple's design and polish and it's hard to picture a crappy product. Maybe it's a hit or maybe it just raises their bottom line, either way it's unlikely to drag on profits.
We'll see how it works out. These earnings include only 6 days of iPhone 6 sales... I worry about Apple in my portfolio probably the least compared to other stocks in the S&P 500. It pays a dividend for crying out loud! I have to remind myself not go over diversification rules...