Facebook
Twitter
Many years ago, I held Apple Inc. (NASDAQ: AAPL) stock. The only reason was because the company had so much cash on its balance sheet that I was getting the business for free. I sold it later for a 30% gain and thought I was a genius.
This was relatively early in my investing career and I hadn’t yet learned one of the most important lessons of investing: no matter what the company does, if its CEO is a true visionary, buy and hold. This was about the time Steve Jobs returned to the company. Nobody had any idea how he would transform his signature achievement in the coming decade.
Steve Jobs has left us, but more than his legacy remains. He did more than create a company culture, he created a consumer culture. Apple captured a small piece of the consumer market initially because of its simplicity. While technology has made that simplicity difficult to maintain, Apple today until Tim Cook remains the company that produces products that are easy to use, and simple to understand.
The one thing I always felt Apple did better than any PC was make computing accessible and easy to fix when something went wrong. PCs are a nightmare to diagnose and repair. Apple is a breeze.
The company also created a store experience unlike any other, thanks to Ron Johnson. The stroke of genius was to create, well, the genius bar. Apple has very slowly and craftily taken the idea of providing free help from tech-nerds and turned it into revenue opportunity. I don’t know if you’ve noticed, but over the past few years, in a subtle manner, the solutions the Genius Bar offers are skewing more and more towards things that will cost you money. That’s the first fix they always suggest.
Not that I’m dissing this. It’s a great play. Furthermore, every Apple employee in the Apple store seems genuinely happy to be there. The efficiency with which consumers are served, the ease of transaction, and the opportunity to test-drive products is unparalleled.
Apple products are so popular that the company never has any reason to offer a sale. Either you love Apple and want the product or you don’t. The company is also constantly updating and revising and innovating with its own products, and every generation is better than the last.
Tim Cook had big shoes to fill and so far, he’s doing just fine.
Apple, as an investment, has been very kind to the longs. After years of watching the stock rise and feeling like I’d missed the boat, I finally bought in at a split-adjusted price of $77. Today it is at $129.
Is it too late to go long? Believe it or not…no!
The company has $145 BILLION in net cash, or about $25 per share. That gives the stock an effective price of $104 per share. FY15 earnings are expected to rise from $6.45 per share to $8.58 per share, or 33%, and 12.75% annually over the next five years.
That puts Apple stock at only 12x FY15 earnings. When you consider it generates $40 billion annually in free cash flow, it makes this valuation even more ridiculous. That’s why I consider it the ultimate growth-at-a-reasonable-price stock.
You are absolutely fine buying in here, and yes, it will arrive at a $1 trillion market cap in the near future…and be worth every penny.
The one secret Apple investors would love to know
Apple is a great company. Its products have revolutionized the way the world works and communicates. No small feat. Yet there’s one small secret that Apple hopes never becomes public. See, there’s actually another company behind all of Apple’s successes… and this company’s stock jumps five times higher than shares of Apple – every single time Apple launches a new product. If Apple investors new about this – there’d be a stampede for the door. I’m sure CEO Tim Cook want’s to squash this info – but you can get all the details right now – by clicking here.