Profit From Apple's Success With This 'Secret' Stock
Apple (Nasdaq: AAPL ) is one of the great high-tech success stories. Led by the visionary, charismatic and sometimes controversial Steve Jobs until his recent untimely death, Apple has become one of the world's leading companies. After starting out as a personal computer maker, Apple is now best known for its mobile devices, which have catapulted it from a cult brand into the mainstream.
In less than five months, AAPL shares have soared from below $400 to about $520 currently. This 30% increase is impressive but well below the stock's all-time high above $700 last year. Unfortunately for many investors, Apple's success has made trading its shares difficult. You have to be swinging a big stick to be able to commit $500,000-plus to trade just 1,000 shares.
Options can be used as alternative tools to capture profits from Apple's moves, but there is another, simpler way to profit from its success -- and that is to purchase shares in companies that supply products and services to Apple.
When these products or services are a critical part of the supply chain for Apple's products, the company supplying them may ride Apple's coattails to great success. The key is to identify a supplier that is reasonably priced and has a multi-year contract with Apple, which helps to ensure the longevity of the relationship. And the lower price enables investors with practically any account size to invest in Apple's success.
GT Advanced Technologies (Nasdaq: GTAT ) is one such Apple supplier that has tremendous upside potential. The New Hampshire-based company boasts a market cap of $1.2 billion and trailing 12-month revenue of $438.5 million. It specializes in crystal growth equipment for the electronic, solar and LED industries worldwide.
Apple just inked a multiyear deal to purchase sapphire material from GTAT. This will likely be the impetus to lift the share price. Apple is giving GTAT a little less than $600 million to help it get its new sapphire furnace production facility up and running in Arizona. GTAT plans on employing over 700 people in this endeavor.
Apple uses sapphire material to create scratchproof glass screens. Favored for its hardness and clarity, sapphire glass has long been used as the crystal on high-end wristwatches and in other luxury brands. GTAT beat competitor Corning (NYSE: GLW ) and its Gorilla Glass for the contract.
GTAT projects that the deal will boost earnings and revenue, which is expected to ramp up to $600 million to $800 million in 2014. The sapphire segment of the company is forecasted to contribute 80% of the 2014 revenue.
GTAT has been struggling primarily due to its core solar business. Revenue in the latest quarter was just over $40 million, and net income was a loss of more than $38 million. Apple's contract should change this weak performance into a long-term winner.
GTAT is expected to pay back Apple's nearly $600 million by 2020. This fact proves that Apple has a long-term commitment to sapphire glass and GTAT. Apple's continued support of the company should lift the share price.
I think an investment in GTAT at these low levels could pay off big.
Action to Take -->
-- Buy GTAT on a break above $10.50
-- Set stop-loss at $8.97
-- Set initial price target at $14.23 for a potential 36% gain in three months
This article originally appeared at ProfitableTrading.com
Ride Apple's Coattails to Double-Digit Profits With This $10 Stock