Apple Inc (AAPL)

Companies go through cycles, and this one is on the downside of a cycle. ROC peaked in 2012, and ROC has been going down since that time. It is still at 15%, which is very respectable. Many companies would kill to have a 15% ROC. Valuation is OK, but doesn’t jump out as being super cheap. There are alternatives that you should be in. He would prefer something like Microsoft (MSFT-Q), Amazon (AMZN-Q), Facebook (FB-Q) or Google (GOOGL-Q). You aren’t going to get killed in this, but when there are alternatives that look so much more exciting, he would go with those.

An excellent company and the street thinks so as well. The Bear case on this is that 60% of its earnings is the iPhone, and what are they going to do next that is a real mover. The whole ecosystem is so powerful that if you own one Apple product, you own a bunch of them.

Partial Sell to buy Facebook (FB-Q)? He hasn’t done a lot of research on Facebook, so can’t give an opinion, but the valuation is not extreme and it is generating gobs of cash. However, Apple is cheaper and is doing great things.

This was a great win for him for 8-9 years. Has been out of the name for about 2 years. He has always been a big believer in their eco-system, but is really confused by why they haven’t bought some of their competition.

(Market Call Minute.) A great company, but it is coming up to an unsustainable earnings level and their margins are going to be under pressure in the future.

(Market Call Minute) It has done well, but don’t chase it.

(Top Pick Jan 5/16, Up 35.29%) He still likes the stock. If you take out all the cash they are trading at 9 or 10 times earnings.

Apple (AAPL-Q) or Alphabet (GOOGL-Q)? He owns both, although he has a bigger position in Google and thinks of it as a better business.

He likes this. Over the last 4-5 months, iPhone 7 was not as bad as he had expected, and also the services side of the business is growing faster than he had thought it would. Also, that is in the context of a not very robust economy. Looking at the product cycle coming, some of the big improvements they’ve made in their laptop and the Mac business and its low valuation, he covered his Short position and is now Long.

A number of analysts have said that this has had its day, it’s a hardware company and the innovation is done. Samsung was always a hardware competitor, and their problems is a great tailwind for this company. They have the tech right and the cameras are fantastic. People are more and more comfortable with the phones. It is becoming more of an integrated device with the watch. Conceptually he likes where the company is going. Technically, it looks phenomenal. Because of earnings, it has just broken up to resistance level, consolidating nicely and is ready to kick higher. He likes it.

He does not like where it is. We are against all time highs. It could break out, but there is definitely resistance here. You could write a put option and get paid about 5% yield over the next year. If it drops 20% then you will have to buy it and that is fine. This is how he would play AAPL-Q. If the option expires, then just do it again.

(Top Pick Feb 4/16, Up 37.06%) Great earnings. The most profitable product ever invented. They keep delivering. Model price is $153.52, which is a 19% upside. We will eventually get to EBV+6 and then to his model price and then he would sell. This is a value stock, but it is losing its valuation differential.

This has been pretty volatile. It started moving into a bearish pattern from its peak in 2015. It tried to base in 2016 and break out. It looks like the breakout is the real McCoy. It is going to have some technical resistance at around $135. Technically, the breakout is positive. However, there is some resistance coming up from the old highs. He would give it a 5 out of 10.

When looking at companies, he wants to make sure they have good visibility of cash flow. This company is more of a hardware company now, with a vast majority of its operating process coming from one product. Over time, this will evolve and service revenues will increase, which will hopefully mitigate some of the volatility and revenue stream, and allow them to branch out to other products. Valuation is compelling and they have a lot of cash, and could be one of the companies that benefits from the repatriation of corporate profits. He is concerned about the technology or hardware risks.

There were reports last year about downgrades but now they are reporting their Q4 tomorrow. iPhone sales were actually pretty strong. The first half of this year may be more challenging. People are already talking about the iPhone 8 coming out in September. It is a good entry point. Apple tends to deliver after any disappointing report. (Analysts' target: $135.50).