Back in March 2012, when many firms were cashing in on Apple (
)'s astronomical growth,
that the stock was "conspicuously absent" from
' portfolio. Rogers, the chairman and chief investment officer
overseeing $500 billion at T. Rowe Price, responded at the time
that Apple was not right for his firm's value funds. A little while
later, he did an about-face on the stock, taking a large position
and adding shares as recently as the third quarter.
When originally asked in March about Apple, Rogers quipped: "I
figure there has to be someone in the world that doesn't own Apple,
and it may as well be me." Then he added, "Our firm is a very large
investor in Apple. Our value funds, one of which I manage, are not
investors in Apple. So I think there's a little bit of a
disagreement in terms of price and valuation and our growth funds
have hit the ball out of the park on Apple, and our value funds
have opted to invest in cheaper situations. So, we like Apple as a
company - that's T. Rowe Price's view - but our value portfolios
have tended to invest in other types of equities."
At the time, Apple's stock price was around $536, heading toward
its all-time high reached in September of over $700, and up over
52% from a year previously. It also traded with a P/E of 15.28 and
P/B of 5.55, both on their way down.
P/E and P/B:
In 2013, Rogers may have believed Apple looked much more like a
value stock. He waited to pull the trigger on Apple until it sunk
to some historical-low valuation points. His entrance point, the
first quarter of 2013, saw the price plunge to 52-week lows - down
as much as 20% over the quarter and almost 40% from its September
high. Rogers initiated a position of 325,000 shares at the
quarterly average price of $466.
The first quarter also saw Apple fall to more than 10-year low P/E
ratios, dipping into the single digits in March:
Its P/B ratio declined to around its lowest point since about 2005:
In his semi-annual letter to investors, Rogers commented on his
decision to buy Apple finally:
"We initiated positions in Apple (
), Joy Global (
), Hospira (
), and Western Union (
), all of which had stumbled in the eyes of investors, resulting in
sharply falling share prices before we decided to invest in them.
Consequently, the companies' stock valuations became more
attractive to us. We normally favor companies whose share prices
have declined because of cyclical worries, sector concerns, or
company-specific issues. When a stock falls in value, its
price/earnings ratio usually declines while its dividend yield
increases, characteristics we look for as value investors. The
strategy can be rewarding as long as the company's fundamentals are
Indeed, the decline of Apple's share price benefited its dividend
as well. Its yield jumped from under 1% at the end of 2012 to
almost 2% in the first quarter of 2013, and to over 2% by the
Apple's "stumble in the eyes of investors" Rogers mentions in its
fiscal 2013 first quarter occurred on a number of counts. The
company missed analysts' revenue and device shipment estimates, and
reported its first period of earnings declines in nearly a decade.
Its gross margin also declined year over year to 38.6% from 44.7%.
The results included several company records, however. Apple beats
its own revenue forecast, reporting a record $54.5 billion, along
with a record $13.06 billion in net income, or $13.81 per share.
iPhone sales reached a record 47.8 million devices, while iPad
sales soared to a record 22.9 million. The company ended the
quarter with $137 billion in cash.
Rogers has continued to acquire Apple shares, though at a lower
rate as the price recovers this year. He bought 225,000 in the
second quarter and 100,000 in the third quarter. In total he holds
650,000 shares, which represents 1.2% of his almost $26 billion T.
Rowe Price Equity Income Fund portfolio. The share price has
increased 3.5% year to date and 22.6% over the recent six months to
$551 per share, giving him an average gain of 22% on the holding.
The company is also trading with a P/E of 14, P/B of 4.05% and
dividend yield of 2.12%. Unless he has sold in the fourth quarter,
Rogers likely still sees further room for growth in Apple's stock.
As he says in his third quarter letter, he usually sells when "a
company's rising stock price makes its relative valuation less
Rogers' other picks from the Computer Hardware sector are Agilent
Technologies Inc. (
), Corning Inc. (GLW) and Dell (DELL), none of which he added to in
the third quarter.
For more Brian Rogers stocks, visit his portfolio here. Also check
out the Undervalued Stocks, Top Growth Companies and High Yield
stocks of Brian Rogers.
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