Apple Inc (AAPL)

The chart is showing a bit of weakness. Not a bad chart. It's been pausing recently, consolidating, or maybe still in its uptrend. All the FANGs will be range-bound in the summer and work out their excesses from their recent (overbought) runs. He's long-term bullish on Apple though.

There's a lot of negativity about Apple now. He loves their products, but his Apple and iCloud mail is buggy. The point is, a lot of Apple's user interfaces are dragging their heels--they aren't improving. They can't compete with Alexa, for
instance. He's thinking of switching to other (non-Apple) apps like Spotify. Not a fan of this stock.

(A Top Pick July 11/17 Up 15%) He still likes it although it struggles. His model price is coming down as people worry about future earnings. A new iPhone X is $1800 in Canada. He would not be a seller yet.

This is a great business. It often pays to hang on to a great business when the stock drops a little. Apple is transitioning from being a pure hardware business into more software services. This will take time and lead to more stable cash flow. Higher yields tend to drive multiples down. This is especially significant for tech stocks, because they have such high multiples at this time.

He would buy it here for the long term. Shipments from a Taiwan producer to Apple were rumoured to be lower, which has spooked the market at bit. He expects a bottom to the price pretty soon. He expects a dividend increase soon. It is at the 200 day moving average support as well.

High customer satisfaction rating. Solid balance sheet with a ton of net cash that it will return to shareholders over time. As people in emerging markets transition to faster phone systems, Apple with benefit. Apple users buy more stuff, basically. Apple can be a little volatile, but take advantage of that. (Analysts' price target $193.03)

Trim, if you hold a large position. The big risk is that Samsung or someone comes out with the next hot phone. He likes the company, but the iPhone IS Apple, a one-product company. That's risky. Will Apple come out with the next hot product that consumers will buy?

It has several issues. For example, he thinks Siri is terrible and Alexa is incredible instead; and Apple Music doesn't stand a chance against Spotify. What really bothers him is that they hold so much cash and they've let these developments happen. He used to be a raving fan of Apple, but he's lukewarm now. He hasn't given up hope, though.

IS Apple high Beta? It's 1.78 He doesn't think so. As one of FAANG, Apple has growth, value and pays dividends--basically everything you want. But can the iPhone be the growth engine forever, and if not, then what's the next
great product? Still has a good balance sheet, and repatriation of cash is happening. Short-term Apple looks good, but long-term is up for debate.

He thinks it has done well, but it is over-extended. If you have a position, watch out. There is a double-bottom that could be a problem if it is taken out. Consider a trailing stop about 10% below current prices.

It has been a great growth story. People underestimate the IOS installed base of over 600 million users. They cross sell it through iTunes. It has recurring earnings. The risk is selling more iPhones and the pressure on the margins. In the end there is still growth ahead but it is recurring revenues from streams of online software services on an existing IOS base. There is also the $40 Billion to bring back into the US and then to spend. Given the run it has had he would not be adding to it.

Would you get into this company at these levels? Fantastic company. A lot of good stuff and bad stuff. On the good side it is trading at a low multiple and they are doing a very good job at increasing their service business (like iCloud and music). On the bad side is that over 60% of their sales are coming from iPhones and that is a little lumpy and they are having stronger competition. He would be cautious.

AAPL-Q vs. CAT-N. CAT-N is machinery and has been a hero. They both really pulled back. CAT-N had a 22% earnings beat last quarter. AAPL-Q is really the iPhone X or 10 story. They missed on units. It is not a lost leader but the concept applies. This will be used like the iPad with augmented reality. You are in a very expensive period of time – an air pocket. AAPL-Q is a great company, however.

(A Top Pick August 26, 2016. Up 46.65%.) He continues to like the business. Sold it late last year because it appreciated so much and wants to get back in. It is starting to give an entry point with the recent selloff. This was a surprise because sales were pretty good, but he thinks investors are taking profits. Does not believe that Apple’s admission that it was slowing down phones will drive customers away because customers are integrated into the Apple ecosystem, owning many interdependent devices.

His least favourite FANG. Prefers Amazon and Facebook. ROIC was 29% in 2012 at peak, but now 13%. How long can they milk the iPhone? Victim of their own success. They have so much cash sitting overseas. Will they invest it? Repurchase shares and pay a dividend would be his suggestion.