Apple Inc (AAPL)

This has had a nice pullback. Trading at $101.03, and his model price is $146.06, a 44% upside. This is the #1 weighted stock in the S&P 500. Dividend yield of 2.06%.

A tale of 2 time periods. Short-term they are running into competition. They put up some truly phenomenal comps, and they are heavily reliant on the product cycle. IPhone 7 is coming out in September, which is a period where you have not only lapped challenging comparison sales numbers, but at the same time you have a new product launch coming. Until then, it is a bit of a tough story. Likes the company and likes management. Doesn’t feel you need to rush into this, but likes the stock long-term.

She is curious about what is going to happen and is watching from the sidelines. We are now getting into a replacement cycle, where everybody already has the product, so instead of growing into new demand, you are essentially replacing what you had. She doesn’t like betting on the consumer.

Has been painted with a brush of being a hardware company that might disappear because some kid in a garage might come up with something better. This is basically why hardware companies tend to be assigned lower valuations. They are working hard towards building a services business with recurring revenue where there is more certainty. About 10% of their business now is Apple Music, Apple pay, etc. and these are applications that he thinks will have more traction in the future. The one thing that has hurt is the success of the iPhone. About a 3^rd of their total market capitalization is in cash.

A great company and the largest company in the world. People are questioning how they can possibly do any better than they have. There are probably around 600 million iPhones out there, about 2 million 6’s, which means there is about 4 million odd 3’s, 4’s and 5’s. If you upgrade 50% of those every 2-2.5 years, that is 100 million of demand from just upgrades, taking out growth in the marketplace and China, which is growing by leaps and bounds. They are just getting involved in India. Trading at 10X earnings.

At this price, it has probably found a bottom. There is not a lot of visible growth. Trading at a pretty low multiple and have tons of cash. They are buying back stock and paying a dividend, so she thinks you are pretty safe with this.

44% upside. They missed on their iPhone volumes. It is not devastating. His model price is still $138. He does not think you can get hurt here. The 2% dividend will probably go higher.

Not a good time to add. When Steve Jobs died, he wondered what Apple was going to bring in the future. For the first 2-3 years, we had what was in the pipeline. After that it was what is new and innovative and what is going to drive the company in the future. Hasn’t seen a lot of evidence of “new”. Outside of the phone, he doesn’t see what is going to propel the company.

The longer-term trend line that started in 2013 has been broken. A long-term trend line that has been broken is really significant. Sometimes you get a rally if it breaks out above the trend line again, but at this time this company is underperforming its sector of tech stocks, and is breaking down.

If you are a long term investor and bought it much higher, then hold on to it. The recent decline is probably overdone. They have a very dominant global brand. There are near term headwinds. He will buy it back at some point in the future.

Had the best quarter in history of humankind, and the stock dropped 6%. This reminds him of Microsoft (MSFT-Q) a few years ago. It was treated as a dead company and was never going to innovate, and had only one product. Apple is generating an unbelievable amount of cash, but don’t think for one second that this is just going to be an iPhone company. IPhone is 60%-70% of profits. Expect they will add more products and add-ons.

The valuation is just too low to pass up at this level. They will most likely increase their dividend in April. They are still gaining market share. His biggest concern would be a lack of pick up in China.

Just reported after the close. Had disappointing numbers relating to iPhone sales, and revenue looked a little bit soft. A classic example where the absolute numbers are actually staggering and quite impressive. The Apple excitement and growth rates are coming sub-10 now. His issue is that it is over-owned and over-followed, and the user experience has declined substantially. They have to fix their eco system service, which is getting complicated, and never used to be. Also, when the PE starts to come down on the stock, it is hard to turn that around.

We should be getting a good rebound coming in, so as a trade this makes a lot of sense. He expects a rebound, because the market has come down quite a bit. Be prepared to trade this if you want to be aggressive, but be prepared to Short when it runs out of steam.

(Top Pick Jan 15/15, Down 7.65%) They are in the midst of a ‘weak refresh’. The market is looking to the iPhone 7 later this year. Here is a company that makes 60% of their revenue from an iPhone with a 40% margin. Their customers are loyal. 73% of iPhone users have an iPhone 5 or older. There is huge opportunity due to the upgrade cycle to the 7 and successive products. A third of their market cap is in cash.