Apple Inc (AAPL)

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.

They’ve done very well over the last 10 years, and the question is, where do they go from here. Do they go into new areas that they haven’t been into? He thinks they’ve been trying, but so far haven’t found the next leg for their growth. Has a good balance sheet and continues to buy back stocks and increase dividends. He wouldn’t expect big things, but they are probably going to do well until they find the next leg of growth.

When this was in the low $90, he bought a small position. He is willing to own this until the next phone launch, which is next fall. The problem is, Mr. Cook is not an innovator, and the best of this company’s days are behind it. It can probably get up to $130-$135. He does not plan to hold the stock after 2017.

(A Top Pick Dec 8/15. Down 5.17%.) His model price is $141.30, a 30% upside. Thinks this is just going to mosey about. Expects it will trade back to $94.50. This is going to be a beneficiary of higher valuations and higher stock prices as the US$ goes up.

The medium term concern is that they have to make a transition to making money from not just one device. They will face margin compression. The stock is not expensive. They have a rock solid balance sheet.

Holding 10% in a portfolio. Cash out? 10% is pushing it in terms of concentration. He would prefer about half of that in a 20-stock portfolio, and would recommend taking a little off the table.

Likes this at the current valuation. He had been a bear on it ever since the watch came out. Apple has been given 2 gifts. Samsung Galaxy 7 was a really strong product, and would have been tough competition for iPhone 7, an evolutionary, not revolutionary product for Apple. When Samsung’s phones started catching fire, that was it for them. The 2^nd gift was president elect Trump. If he is able to open up a tax holiday, where companies can repatriate their offshore cash, that is going to be a home run for this company. They have $236 billion in cash, with about 90% of it held offshore. 2017 will be the 10^th anniversary that the initial iPhone was produced, so expect a huge product from this company at that time.

A cheap stock. It is a great company, because it has lots of cash, a great installed base, and continues to come out with new forms. Their Cloud and services business will continue to grow. You are not paying a lot for this. Expects they will continue to increase the dividend. A little bit of an issue is with Trump wanting manufacturing to be done in the US, so phones will cost a lot more. Trading at 12X forward earnings with a dividend of 2%.

(Market Call Minute.) One of those value tech companies. It is hard to see where the growth comes from.

Technology in general tends to do well from October through to January. There are some technical concerns on this. Even though we are in the period of seasonal strength for technology, this really hasn’t benefited with the other economically sensitive names, post the Trump election rally. There was a trend break, and it is starting to curl over again at about the 50-day moving average. The market is telling you that that intermediate level of resistance is going to hold, and could potentially turn lower.

Not a fan right now. They peaked their ROC in 2012, which was 30%. With the trailing 4 quarters, the ROC is 15%, so the ROC has been cut in half. In fairness to them, they have a lot of cash on their balance sheet that they don’t know what to do with, and he would like them to dividend that back out. The cycle for smart phones is probably getting old. He would prefer other places to put your money.

The iPhone is now in a much more mature state but will grow their earnings into the next year. The effect of the election is not known at this time. $220 of $240 Billion dollars of their cash reserves are in Ireland. If there was a tax holiday on repatriated earnings it would be positive for Apple. He thinks it will grow this year but feels you need clarity in the policies of the government before you see a big lift in it.