Fund managers still leery of Apple stock, believe shares could slide further before rebounding
Investment managers on Wall Street believe that Apple stock is currently undervalued, but they're also reportedly concerned that shares of the company could drop even further before their eventual rebound.
Portfolio managers interviewed by the Financial Times indicated that investors remain nervous about Apple's future prospects in China, as well as the anticipated launch of the "iPhone 6s." Even with those concerns, fund managers concede that Apple is trading at a discount when compared to the rest of the market.
Those managers are still waiting, however, over concerns that shares of Apple could continue to dip heading into the debut of the next iPhone. There is a fear that despite the company's recent slide, it may not have yet bottomed out.
Accordingly, most investment banks on Wall Street tracked by AppleInsider continue to advise that investors buy in. In recent weeks, a number of firms have reiterated their price targets and "buy" recommendations, including Macquarie Securities, RBC Capital Markets, FBR Capital Markets, and UBS.
Apple did receive one high-profile downgrade earlier this month, however, when Bank of America Merrill Lynch reassessed the company's stock to "neutral."
Shares of Apple have continued to slide since the company's June quarter results, which fell short of the market's lofty expectations even though they were a new record for the iPhone maker. There has also been concern that the Chinese market could prove soft for Apple, especially in the face of low-cost competitors like Xiaomi and Huawei.
Apple, however, remains bullish, not only for future iPhone growth, but also for its near future in China.
Apple Chief Executive Tim Cook noted during his company's last quarterly earnings report that his company still saw 90 percent growth in China last quarter. And worldwide, just 27 percent of the iPhone installed base has upgraded to the latest generation iPhone 6 series.
"We view that as a very bullish sign on the future, and there's a lot of headroom left for upgraders," Cook said, not so subtly suggesting that the anticipated "iPhone 6s" series has plenty of growth opportunities.
Portfolio managers interviewed by the Financial Times indicated that investors remain nervous about Apple's future prospects in China, as well as the anticipated launch of the "iPhone 6s." Even with those concerns, fund managers concede that Apple is trading at a discount when compared to the rest of the market.
Those managers are still waiting, however, over concerns that shares of Apple could continue to dip heading into the debut of the next iPhone. There is a fear that despite the company's recent slide, it may not have yet bottomed out.
Accordingly, most investment banks on Wall Street tracked by AppleInsider continue to advise that investors buy in. In recent weeks, a number of firms have reiterated their price targets and "buy" recommendations, including Macquarie Securities, RBC Capital Markets, FBR Capital Markets, and UBS.
Apple did receive one high-profile downgrade earlier this month, however, when Bank of America Merrill Lynch reassessed the company's stock to "neutral."
Shares of Apple have continued to slide since the company's June quarter results, which fell short of the market's lofty expectations even though they were a new record for the iPhone maker. There has also been concern that the Chinese market could prove soft for Apple, especially in the face of low-cost competitors like Xiaomi and Huawei.
Apple, however, remains bullish, not only for future iPhone growth, but also for its near future in China.
Apple Chief Executive Tim Cook noted during his company's last quarterly earnings report that his company still saw 90 percent growth in China last quarter. And worldwide, just 27 percent of the iPhone installed base has upgraded to the latest generation iPhone 6 series.
"We view that as a very bullish sign on the future, and there's a lot of headroom left for upgraders," Cook said, not so subtly suggesting that the anticipated "iPhone 6s" series has plenty of growth opportunities.
Comments
There has also been concern that the Chinese market could prove soft for Apple, especially in the face of low-cost competitors like Xiaomi and Huawei.
...
Completely ignoring the "status symbol" nature of iPhone purchases in China.
Someone who has the disposable income to buy an iPhone in communist china really doesn't care that Xiaomi and Huawei make cheaper, shittier Android phones loaded with malware.
BMW and Kia do not serve the same markets.
Even if Xiaomi and Huawei OWN the mid-price/low-price end, their margins are razor-thin, so who even cares?
But, if you are a young investor with some money saved up, it offers a great entry point into the market to build long-term wealth. If you have $1,200, buy 10 shares. If you have more money and can save $10-15k over the next 12 months, consider buying 2 or more options contracts that are deep in the money (strike price of $60-80) and expire more than 12 months out. Before they expire, sell what you can't afford to execute for whatever gains you have made. The latter is a fairly low-risk investment which should give you a 20% gain in a couple months, and if you are lucky you will double your money by January.
But, taking investment advice from anyone on the Internet is not really a great idea.
While I am bullish on Apple, I also tend to agree that there is risk that Apple will linger in the 100-115 range until October. I have my price that I am willing to buy more shares, but since I have too much of my portfolio in Apple as it is now, I feel that any additional investment needs to be at "can't pass up" prices. The marginal gains vs the risk just doesn't warrant it *for me*.
But, if you are a young investor with some money saved up, it offers a great entry point into the market to build long-term wealth. If you have $1,200, buy 10 shares. If you have more money and can save $10-15k over the next 12 months, consider buying 2 or more options contracts that are deep in the money (strike price of $60-80) and expire more than 12 months out. Before they expire, sell what you can't afford to execute for whatever gains you have made. The latter is a fairly low-risk investment which should give you a 20% gain in a couple months, and if you are lucky you will double your money by January.
But, taking investment advice from anyone on the Internet is not really a great idea.
Your suggestions are why the market is no longer for investing in companies, it's simply gambling that on any particular day, the stock price will be at a level that makes you money in the short term (anything less than a long term investment). It's sad the entire world's economy is based on Las Vegas style gambling, which as we all know is fixed.
I predict next earnings call Apple notifies us of another multi-billion dollar share buy back.
As is said by many, never get too caught up in the day-to-day or month-to-month price levels of a given stock, other than to consider entry points. Invest in equities with a long term view.
Of course there are concerns & risks for any company, as competition and innovation abound these days. However, the fact that Apple is considered riskier by the market compared with tech peers (hence its discount) is always amusing. By many (most?) qualitative and quantitative measures, Apple has a low risk profile:
- brand, customer satisfaction, customer loyalty
- growing platform & ecosystem
- hugely successful existing products with growth, plus new products
- growing focus on expanding in vertical markets (enterprise, education, health care)
- expansion of services business (which provides those annuities that are so valued by Wall Street)
There seem to be two or three main risks always recited by the media:
1) iPhone dominates Apple revenue & profit. But what else is expected, or desired, when the smartphone industry is the most valuable device business in the world? And it has got some strong growth left as the market moves from ~2B devices/year to potential 5-6B (as smartphones eventually replace all feature phones over time). Then there is some compelling evidence that in saturated markets, Apple grows share through switchers, as more people move up-market.
See this article from Benedict Evans: http://ben-evans.com/benedictevans/2015/5/13/the-smartphone-and-the-sun
And if necessary in the future, don't you think that a company with the highest ASP, and doing huge R&D, wouldn't be able to lower costs over time & grow/maintain share, as they have shown they can do in the mature PC market? History is right there for all to see.
2) Concerns over Apple able to innovate / introduce (completely) new products. Perhaps not conclusive yet, but many think Apple Watch will be a strong offering in a few years (I think it is a great - perhaps best - Apple gen1 product yet). Think not of how many sold in 4 months since launch (looking quite impressive) , but how they approached the market, the innovations, production processes, solving simple issues the existing watch industry didn't address in 100 years, etc.
3) China. Well sure, there could be some issues there with economic growth, consumer confidence, etc. Everyone that sells into China has that risk. There could be hiccups in growth. Apple has shown though, through the last recession, ability to grow in tough times. Why is Apple given a higher risk premium, rather than lower? There are also other markets where share is low that may also grow as more enter the middle class.
Completely ignoring the "status symbol" nature of iPhone purchases in China.
Someone who has the disposable income to buy an iPhone in communist china really doesn't care that Xiaomi and Huawei make cheaper, shittier Android phones loaded with malware.
BMW and Kia do not serve the same markets.
Even if Xiaomi and Huawei OWN the mid-price/low-price end, their margins are razor-thin, so who even cares?
Status symbols are less popular in China recently:
http://www.zerohedge.com/news/2015-08-09/luxury-goods-and-status-symbols-trouble-china
Also, look at the sales performance of BMW in the 2008/2009 financial crisis:
http://www.marketwatch.com/story/bmws-profit-down-17-as-financial-crisis-soft-dollar-bite
http://www.wsj.com/articles/SB123684986834706141
I have 75% of my money in Apple stock, and I think it is very undervalued - but I think it is a mistake to imagine that luxury goods are recession proof.
You mean the same fund managers who consistently perform worse than passive index funds? They don't know what the hell they're talking about.
I think blindfolded monkeys throwing darts to pick stocks have a better record than these 'managers'....
There has also been concern that the Chinese market could prove soft for Apple, especially in the face of low-cost competitors like Xiaomi and Huawei.
...
Completely ignoring the "status symbol" nature of iPhone purchases in China.
Someone who has the disposable income to buy an iPhone in communist china really doesn't care that Xiaomi and Huawei make cheaper, shittier Android phones loaded with malware.
BMW and Kia do not serve the same markets.
Even if Xiaomi and Huawei OWN the mid-price/low-price end, their margins are razor-thin, so who even cares?
Moreover, we just saw the news about HTC being worth less than its cash.
Xiaomi is next. It's only a matter of time.
While I am bullish on Apple, I also tend to agree that there is risk that Apple will linger in the 100-115 range until October.
Ah, really? Can you show us the model or analysis that shows this 'risk'?
Maybe it will drop low enough for me to afford some more.
Now approaching 3%...
While I am bullish on Apple, I also tend to agree that there is risk that Apple will linger in the 100-115 range until October. I have my price that I am willing to buy more shares, but since I have too much of my portfolio in Apple as it is now, I feel that any additional investment needs to be at "can't pass up" prices. The marginal gains vs the risk just doesn't warrant it *for me*.
But, if you are a young investor with some money saved up, it offers a great entry point into the market to build long-term wealth. If you have $1,200, buy 10 shares. If you have more money and can save $10-15k over the next 12 months, consider buying 2 or more options contracts that are deep in the money (strike price of $60-80) and expire more than 12 months out. Before they expire, sell what you can't afford to execute for whatever gains you have made. The latter is a fairly low-risk investment which should give you a 20% gain in a couple months, and if you are lucky you will double your money by January.
But, taking investment advice from anyone on the Internet is not really a great idea.
If you are somewhat bullish on AAPL longterm but are neutral-to-bearish in the near term, and you have a price target to buy more shares that is somewhat below current market value, then there is a tailor-made options strategy for you: sell puts at a strike near your price target. If the share price never gets that low, you pocket the premium and don't have to do anything else (except maybe sell more puts to repeat the process). If the price does get down to the strike, then you are obligated to buy at that value (which you already intended to do). Either way, you still keep the premium.
The downside, of course, is if AAPL never sinks as you think it will and you miss the train for more gains than the measly premiums add up to. But hey, it sounds like you were already deciding not to buy more shares at this level, so you might as well be selling puts while you're not buying shares.
(EDIT: the above is not the only downside. One example doomsday scenario is if sometime before the expiration date, Tim Cook gets hit by a bus and AAPL shares crumble down well below the strike point. You will still be compelled to buy at the strike point. So the risk, when compared to what you are doing now, is that you get into a contract that compels you to do something when you otherwise could have just changed your mind and/or your buy target.)
Thompson
Systematic Risk (?) Estimation
VarianceAAPL 60.10
VarianceS&P 500 19.51
CovarianceAAPL, S&P 500 18.34
Correlation CoefficientAAPL, S&P 5001 0.54
?AAPL2 0.94
?AAPL3 2.01
Calculations
1 CovarianceAAPL, S&P 500 ÷ (Standard DeviationAAPL × Standard DeviationS&P 500)
= 18.34 ÷ (7.75 × 4.42)
2 CovarianceAAPL, S&P 500 ÷ VarianceS&P 500
= 18.34 ÷ 19.51
3 AverageAAPL – ?AAPL × AverageS&P 500
= 3.04 – 0.94 × 1.10
Your suggestions are why the market is no longer for investing in companies, it's simply gambling that on any particular day, the stock price will be at a level that makes you money in the short term (anything less than a long term investment). It's sad the entire world's economy is based on Las Vegas style gambling, which as we all know is fixed.
I ask myself, was the stock market always like this where even overall poorly performing companies could make investors rich. I could never imagine Amazon beating Apple out in share gains over a five year period. I wouldn't think Amazon could top Apple in my wildest dreams but it's there in black and white. Amazon is blessed and Apple is cursed. Netflix shareholders are getting rich beyond dreams and yet the company is still only a $50 billion market cap company that simply streams other company's videos. Apple makes that money in a single quarter selling actual products and yet recent Apple shareholders are getting slaughtered. Apple's recent share price movement make it look like a company on the verge of bankruptcy. It's just nuts.
All the basic stuff I learned in accounting is useless for understanding Wall Street. I couldn't balance any accounting books based on guessed future earnings. That's just crazy. The assigning of random multiples to companies is the most ridiculous thing I can imagine. Some P/E multiples fall so far from reality that they can't possibly be useful. Company fundamentals are a waste of time in determining share value due to all the inconsistencies. Something has to be rigged but whatever it is it isn't illegal. Investing in the stock market certainly does seem like gambling and it shouldn't be that way. No one should be able to handicap a company based on rumors and collusion. Apple should never be as volatile as it is. Big ocean liners should move smoothly and not be turning on a dime.
Also of note: wages in China are on the rise, thus opening up new markets for higher end products.
Ah, really? Can you show us the model or analysis that shows this 'risk'?
Heck. the advice is all over the spectrum. Some are rating it a strong buy, others a hold. IMHO go with your gut. I've not yet seen anyone that's always right. All I know is that Apple stock has been going up for years and if I wanted to play in the market (I don't) without much risk I'd probably make sure to include AAPL.
Systematic Risk (?) Estimation
VarianceAAPL 60.10
VarianceS&P 500 19.51
CovarianceAAPL, S&P 500 18.34
Correlation CoefficientAAPL, S&P 5001 0.54
?AAPL2 0.94
?AAPL3 2.01
Calculations
1 CovarianceAAPL, S&P 500 ÷ (Standard DeviationAAPL × Standard DeviationS&P 500)
= 18.34 ÷ (7.75 × 4.42)
2 CovarianceAAPL, S&P 500 ÷ VarianceS&P 500
= 18.34 ÷ 19.51
3 AverageAAPL – ?AAPL × AverageS&P 500
= 3.04 – 0.94 × 1.10
Per usual, you chime in when I was asking someone else a question.
Did you calculate your variances, covariances and betas with prices instead of returns (and even then, total returns)? Also, over what time period? Monthly, weekly, or daily returns?
Oh, that was like a test then? You didn't really want an answer, you wanted to know if HE had an answer. Gotcha. No prob.