Apple Inc (AAPL)

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).

(Top Pick Jan 21/16, Up 29.11%) You just have to know a few facts about it to be comfortable. One is that a third of their capitalization is in cash. They can now bring that back to the US. They have about a billion devices out there and a 93% loyalty rate. They are trading at a modest valuation.

(A Top Pick Jan 27/16. Up 31.34%.) When he picked it, it was an opportune time. The company had just sold off following a 1^st quarter report. A great company and a great product, but still a silly low valuation.

(A Top Pick Feb 10/16. Up 29.19%.) Going into the watch release, he sold half his position. Has been reducing his position, as he feels they may be falling a little behind. Feels that the closed Eco system is potentially becoming a bit of a hindrance for future growth. They seem to be falling behind in artificial intelligence softwares. You don’t need to panic, but he wants to see them start executing on new innovations. The one missing link is their AI capability, where they are falling behind.

She likes companies that don’t sell to consumers. It is a tough industry. She watches Apple from the sidelines.

The PE multiple is low at about 10 or 11 times. Not a lot of growth and clarity, because the iPhone’s market penetration has probably been saturated. They are coming out with a new phone later this year, which is supposed to be quite a new design compared to the prior ones. They have a lot of cash sitting overseas, so if Trump is successful in reducing the repatriation tax from 35% to 10%, this company will be a natural beneficiary. Then the question is, what do they do with that money.

(Top Pick Feb 4/16, Up 22.22%) His model price is $146.42, a 26% increase. Apple will benefit due to repatriation of earnings. Earning season starts next week.

On a 3-year chart, the stock declined and is currently in a bit of a base. A base is where you start to see the highs reach a similar inflection point. It appears this is breaking out. This looks reasonably bullish as long as it can stay above the breakout point of around $110. His target would be into the high $130, and from there you would have to see where it goes. A reasonably constructive looking chart.

Feels this is yesterday’s stock, and he prefers owning tomorrow’s stocks. Since Steve Jobs died, innovation is not what it used to be. It is more in upgrading rather than new products, other than the watch. He is not a fan.

(A Top Pick Dec 7/15. Down 1.83%.) He believes in the IOS operating system, and thinks this is going to move more towards a software company over time. It will get a higher valuation. It won’t be selling 50 million iPhones a quarter, and there might be some margin pressures, but meanwhile it is trading at 11X forward earnings, probably 9X net of all the cash on the balance sheet. This has huge, huge value in it.

He sees catalysts in this. They have what is called a “refresh” or “repurchase” program with the iPhone. The iPhone 8 is going to be hitting right at that point and grabbing market share, and you are going to have people switching devices. That will bring a new revenue source for them. People have been concerned about declining iPhone sales, and he thinks they will increase in 2017. Repatriation would be massive for this company. They have over $150 billion sitting offshore. The expectation is that if it actually does happen, they are probably going to bring about $100 billion back, which could go into special dividends, dividend increases and share buybacks. Also, they have been significantly increasing the revenue for services. Dividend yield of 1.97%. (Analysts’ price target is $131.65.)

(Market Call Minute.) Very attractively priced.

This has suffered a little. It was in a downtrend from early 2015, and has now broken that, and there is now starting to be a little bit of a pickup. Currently we are in the technology period, where technology can do well. This looks like it is in a fairly good position right now.

He likes this. The biggest challenge for the street is that many look at this company and expect it to look, feel and behave like it did 5-7 years ago. It is simply not the same. The business today is much larger and less nimble than it was 7-8 years ago. It is a much more mature business, a business that has much larger market share in many of the areas that it had where it had very little to zero market share about 10 years ago. Feels they need to beef up their dividend. It has a reasonable dividend of about 2%, but not enough to make investors and analysts look at it as a more mature business.