Apple Inc (AAPL)

(A Top Pick Nov 3/15. Down 7.87%.) Last quarter was good. He is a big believer in the IOS system. The multiples are ridiculously cheap.

His office is divided on this. He is not a big fan, but his staff seems to like it better. He wonders if Apple can maintain the huge profit margins that they have. This is expensive, not from the point of view of the P/E ratio, but from the point of view of huge profit margins. It has been very unusual for companies like this to charge such high prices relative to their competitors for electronic goods. His concern is that they won’t be able to keep doing that for too much longer, in which case the stock would not do very well. It is a really tough stock to call, and he would rather invest in different ideas.

Market Call Minute.

The Trump victory throws things wide open, because if they get to repatriate some of their overseas capital, that could give them the opportunity to allocate cash to shareholders. Not a big fan as he thinks they have already hit their plateau, and their innovation is just one iPhone after another.

Don’t confuse a good company with a good investment. We are at the point in the Apple lifecycle where we need the next product, because the next product is going to move the needle. It has to be something that we haven’t seen. This is starting to get to the point where he would say it is time to Sell.

A very interesting purchase here. We are probably getting close to the end of the iPhone product cycle, and expects that they will be going through a transition. They announced they are going to focus on services, which is a little bit of content. At the current valuation, it is an attractive Buy, and there is potential to see some nice upside here.

A “yesterday” stock. To him, the creativity died when Steve Jobs died. There were some products that came out that were already in the pipeline, but since then it has just been “me too”, add on, etc. It is becoming more of a software company than a hardware company. It is really dependent on iPhones and the phone hardware business has been a graveyard for lots of companies.

Got out of this at the beginning of the year. It has gone up, down, up, down, and back to below where he had sold it. Feels this has moved from a very exciting trending name. The bloom is a little off the name now, so he has deployed money elsewhere. The ecosystem is really important to this name now, and it is less of a hardware story. Of all their products, he finds that the Apple TV is getting really interesting, which could be a real surprise for a lot of people.

A classic technology stock and does very well, normally from the middle of October through until the 2^nd week in January. The chart shows this is currently coming close to the previous trading range, where we can expect the stock to continue to move higher. Technicals are positive, the stock is slightly outperforming the market and the trend is on the upside. Stick with this until the middle of January, at the time when companies love to announce new products.

This stock may have been left for dead and then all the issues with the Samsung note happened and all of a sudden, this was the only latest generation notebook you could buy. Apple scores in the top 25% for price momentum, top 20% for valuation, a huge 36% ROE, and reasonable at a 13 times PE. It is growing at a multiple that is less than the market. You are in the transition from growth to value stock.

This has been a teeter totter ride. They have lots of cash on hand. He is expecting them to announce a dividend increase, and potentially a one-time special dividend. The service’s side of the iTunes-I store business is generating enough revenue to becoming a Fortune 500 company all on its own. Don’t expect this to grow as much is it has in the past. Looking at its valuation, the dividend it pays, the cash it has, it is very difficult to find companies of that quality with that kind of cash and balance sheet, and trading at that multiple.

(Market Call Minute.) Service revenue is growing at 27%. It is not about the iPhone 10, which is coming out next year, but that is going to be a big deal.

Got stopped at around $116. They are going to benefit from Samsung’s problems, which has provided a lift on the stock recently. He is nervous about how you move the needle for a $500 billion+ company. That kind of market cap really requires them to keep innovating on and on. He would prefer to wait on the sidelines to see what else they can come out with.

The biggest company in terms of market cap. You get a 1.9% yield. The real questions being asked is “what have you done for me lately” and “what are you going to do for me now”. This has been a wonderful, wonderful start. This is probably not going to do any more than go in line with the market going forward.

The services revenue should command more credit. They have the resources to be able to expand into other areas and they are smart to go into other areas. The bar was quite low with the iPhone 7. They have two Trillion dollars to repatriate from off shore. This will be good for Apple. There are a whole host of opportunities for them in the future.