You already know the amazing story of
Apple (Nasdaq: AAPL)
, "the world's greatest growth stock."
Apple was a growth stock for over a decade. And as a result,
investors can't understand that the growth story is over.
But Apple investors (myself included) shouldn't panic. The
fact that this company is maturing actually means positive things
for shareholders. And the fact that Wall Street doesn't get it
means we can buy a great company for an incredibly discounted
Future profits from Apple will be more dependent upon the
company's pro-shareholder initiatives, including the growing
dividend and aggressive share buyback program. Apple might
not be a growth company anymore, but it's fast becoming one of
the biggest, most powerful income investments.
You see, the Apple skeptics are missing the boat. They keep
debating whether Apple can continue to innovate. They weigh
whether the huge company can continue to act like a
start-up. And they wonder if Apple will be a pioneer,
creating new product categories for years to come.
In my opinion, the jury is still out. Steve Jobs set a
very high bar during his tenure as Apple's CEO. And he had
big shoes that Tim Cook is trying to fill.
However, Cook is a talented exec, and Apple continues to
employ many of Silicon Valley's best and brightest. The idea that
innovation at Apple died with Jobs doesn't sit well with me.
But like all big tech companies, Apple has matured. In
part due to its size, and in part due to its circumstance.
While Apple will continue to innovate and create new products,
it doesn't really matter. Because Apple's stock price
reflects a stale business that will never grow again.
At the very least, Apple will continue to satisfy the appetite
of consumers in current categories. The iPhone isn't going
anywhere, nor is the iPad. Android phones and tablets may be
capturing market share, but Apple's numbers will continue to grow
anyway… and the company sells more devices and earns far more
profit than any competitor.
Apple's computer sales have actually bucked industry trends,
holding steady or gaining ground even as other manufacturers have
seen orders drop precipitously. This means that even if Apple
doesn't have another breakthrough product, the company can and
will continue to grow.
Today, the best tech companies aren't growth investments.
They're value and income investments. When I look at Apple, I see
General Electric (
Except that right now, Apple sells for less than 1/3 the price
you'll pay for GE on an adjusted enterprise value PE.
Apple is becoming a quality company that sells quality goods
in an increasingly mature marketplace.
Recently, Apple has ushered in this new chapter by increasing
it's dividend. I wouldn't be surprised if Apple becomes one of
the biggest dividend growers in the world - a company that raises
its dividend year after year.
The company's dividend isn't the only shareholder friendly
initiative though. The company recently expanded a share buyback
program. The $60 billion program is the biggest in the
Value and income investors alike should love the stock, thanks
to the shareholder-friendly initiatives and the cheap stock
But because Apple hasn't been a value or income stock until
recently, investors literally can't think of it that way. They're
still looking at it like a fast-growing tech stock.
At $432, now is the perfect time to buy Apple shares. The
stock is cheap, with a P/E just north of 10. The company's growth
is superior to most companies of its size. And the balance sheet
is pristine, with more cash than many countries.
Apple may not have the high dividend yield that most income
investors seek. But you should be attracted to the growing
dividend, huge share buyback program and the cheap stock.
Apple is truly a unique opportunity to buy a world-class
company at a very reasonable price. With the stock market near
all-time highs, Apple certainly appears attractive.
Especially when you consider the potential for substantial gains
if the company unveils another device that changes the world…