The revelation of O’Leary’s guardedness about Apple Inc. (NASDAQ:AAPL) comes on the heels of Xiaomi being tagged as a new noteworthy competitor of the iPhone maker.
“I think Carl you really nailed it on the head in terms of why Apple doesn’t trade at a premium to market multiples because investors ask themselves this question every day: Am I getting myself involved in consumer electronics where I know the outcome over a long period of time?” O’Leary said.
According to him, investors are asking whether the company in the consumer electronics space they are investing in will be something like a Sony, a Motorola, a Nokia or something completely different. He said that we don’t know the outcome of this, possibly referring to Apple Inc. (NASDAQ:AAPL), because the more people see commoditization of handsets and soon to be watches, “Apple’s unique environment may or may not allow it to hold its margins.”
He said that he tells people when they ask him why Apple Inc. (NASDAQ:AAPL) is not trading at a 27% premium because it’s growing so well that he’s seen countless companies who have done very good in the past then suddenly disappear from the limelight in the consumer electronics space.
“I’ve seen this movie before. Now these stores in China are going to be hugely successful, just as they were stateside. I think it’s more of the same and hopefully it will continue to spur growth, but that nagging concern about consumer electronics and their story is what keeps investors like me not overweighting this position. I own this stock, but I’m not overweight,” he said.
Ken Griffin’s Citadel Investment Group owned about 3.84 million Apple Inc. (NASDAQ:AAPL) shares by the end of the third quarter of 2014, a substantial 56% decrease in the company’s stake in the iPhone maker quarter over quarter.