Paul Schatz, President and Chief Investment Officer of
, had some interesting things to say on
this morning. He believes that Apple (NASDAQ:
) is in a multi-year decline that will shave 50 to 70 percent off
its peak value of more than $700. "This was a follow-up piece
from a late April / early May interview where I made the original
call," Schatz told Benzinga. "It wasn't really about the nuts and
bolts of Apple, per se, it was about every bull market [having] a
story stock. You can go back -- I've gone back 100 years -- every
single bull market has a story stock. When the bull market ends,
the story stocks are taken out and shot."
In 2007, the big story stock was Google (NASDAQ:
). "We all saw where Google declined in '08 and '09," said
Schatz. "In 2000 it was AOL (NYSE:
) and Yahoo (NASDAQ:
), and you saw what happened with those. You can go back to GE
), which was a story stock. GM (NYSE:
), RCA, Navistar (NYSE:
Sometimes there is more than one story stock. "The common
thread is [that] the story stock becomes somewhat ingrained in
our investing fiber, which Apple certainly has -- it can do no
wrong," said Schatz. "And everyone is talking about how cheap it
is based on the P/E. And my cautionary words are, 'So were the
housing stocks in 2007.' They were all single-digit P/Es and the
banks weren't far behind. So was GE."
"What we never anticipate is that when companies mature they
go from growth companies to value companies, and that is what I
imagine Apple becomes. Apple loses its growth allure. It's
already paying a dividend. I expect its dividend to go up, up, up
over the years. It's going to become more like a Microsoft
) and an Intel (NASDAQ:
) rather than a high-growth company."
What about Google's rebound?
"Google, during the bear market, went from -- I'm gonna round
from memory -- roughly $750 to $250," Schatz explained. "That's a
pretty big decline. You're talking two-thirds of the stock going
down in 18 months."
Regardless, Schatz said there is nothing to stop a declining
story stock from rebounding. "But we haven't even gotten to the
stage where Apple has been taken apart yet," he said. "Apple,
from the bear market, went from $92 all the way to $700. So when
this bull market ends, I think Apple will have the same fate as
we saw with Google."
Schatz added that Chevron (NYSE:
) and Exxon (NYSE:
) were once similar to Apple and Google.
"And those companies are great long-term success stories," he
said. "But they went from ascending at a 60-degree angle to
ascending at a 25-degree angle. They become much different after
they lose that story stock status."
No matter what happens, Schatz told Benzinga that he thinks
Apple is a great company. "But just because it's a great company
doesn't mean that it won't go down in price," he said. "If $700
was the peak, it maybe gives back half to two-thirds of the rally
it made from $90 to $700. That would put it between $300 and
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