4 Reasons Why I Bought Apple Inc. (AAPL)

Page 1 of 2

LONDON — I made a double exception when I invested into Apple Inc. (NASDAQ:AAPL) last week.

I generally avoid investing in technology stocks. The fickle nature of consumer demand for the latest gadgets — with much of it coming from people less than half my age — makes it hard to pick winners from losers. And winners can quickly become losers: BlackBerry, Nokia (NYSE:NOK), Palm, Psion to name just a few.

I also rarely invest directly in U.S. stocks. The process is straightforward but they’re just that bit more complicated to analyze and keep track of.

What were the compelling reasons to make me break my normal rules?

Apple Inc. (NASDAQ:AAPL)

1. Valuation
OK, so this is putting the cart before the horse. Price alone is never a good reason to buy a stock. “Better to buy a great company at a fair price than a fair company at a great price,” to quote superinvestor Warren Buffett.

But Apple’s recent well-publicized share price decline provides a good entry point. The stock dropped 10% after quarterly results revealed “only” 18% revenue growth and margins slightly below expectations, pulling the price down by more than a third from its September high.

It’s now trading on a price-to-earnings ratio of 10, barely more than half the S&P 500 average of 19. Strip out its vast $140 billion cash mountain and the P/E is more like 7.

2. Market position
Apple Inc. (NASDAQ:AAPL) has a great market position in a growth industry. Though saturation must come eventually to developed markets, there’s huge untapped demand in emerging markets. Technology research firm Gartner expects the smartphone market to double from 2011 to 2014.

Bears fear cheaper local products will cannibalize sales in the Chinese and Indian markets. But the big Apple is an iconic Western brand, and I think the success of prestigious fashion brands like Burberry is a better pointer to how things will play in China.

Apple Inc. (NASDAQ:AAPL)’s distinctive approach of synthesizing hardware and software to make an easy and rewarding user experience has bought it a loyal fan base. And there’s some stickiness from locking users into services such as iTunes and iCloud.

3. Innovation
Apple’s excitement has always come from its ability to break the mold and reinvent the market place. That kind of thinking is embedded in the DNA of the company — surviving inspirational CEO Steve Jobs, and protected by the legacy products that deliver abundant cash flow.

Apple Inc. (NASDAQ:AAPL) fans predict that the company’s next target will be the household TV. Tech ignoramuses like me just see a speculative upside in the possibility that the company may yet again disrupt existing providers’ technology — while being aware of the risk its own business gets disrupted by an upstart innovator.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!