Apple Inc. (AAPL) Is A Good Stock for 2013

Page 1 of 2

Apple Inc. (NASDAQ:AAPL) was the most popular stock among hedge funds for the third quarter of 2012 (see the full rankings), as our database of 13F filings included 146 hedge funds and other notable investors with long positions in Apple. The company’s fiscal year ended in September, with revenue growth coming in at 45% compared to the previous fiscal year. Over the last four fiscal years, sales grew at a CAGR of 43% (though the growth rate was 66% in FY 2011). It’s certainly a bit dampening to see that revenue was up only 27% in the fourth fiscal quarter of the year versus a year earlier, but we think that it’s reasonable to expect at least some revenue growth going forward. A similar line applies to net income: net margins have generally increased over the last few years, with the result being that the four-year CAGR of earnings has been 62% (including a 61% from the last fiscal year).

However, the recent pullback in the stock has left Apple Inc. (NASDAQ:AAPL) trading at 12 times trailing earnings- a multiple which generally indicates that the market expects just about no growth going forward. We wouldn’t call Apple Inc. (NASDAQ:AAPL) a trillion dollar stock (which is roughly what sell-side analysts are calling for, with a five-year PEG ratio of 0.5), but the current market cap of about half that figure seems cheap. Of course, the earnings multiples don’t count for Apple’s sizable cash hoard.

GREENLIGHT CAPITAL David Einhorn

Billionaire David Einhorn of Greenlight Capital cut his Apple Inc. (NASDAQ:AAPL) stake during the third quarter of the year but it was still his largest position by market value at 1.1 million shares (check out Einhorn’s favorite stocks). Fisher Asset Management, managed by fellow billionaire Ken Fisher, had owned about 100,000 shares at the beginning of July but increased its holdings to about 960,000 shares by the end of September (find more of Fisher’s stock picks). Tiger Cubs such as Rob Citrone of Discovery Capital Management, Philippe Laffont of Coatue Management, and Andreas Halvorsen of Viking Global also had large positions in Apple Inc. (NASDAQ:AAPL).

It’s certainly easy to make the case that Apple is the best buy of the large consumer technology companies. Google Inc (NASDAQ:GOOG) trades at 16 times forward earnings estimates- a large premium to Apple- and that forecast depends on substantial improvements over the company’s trailing performance. It’s of course possible for Google to hit that target, particularly by better integration of the Motorola business unit which has thus far been a drag on margins, but Apple just looks like a more certain value. Microsoft Corporation (NASDAQ:MSFT) posts an attractive forward P/E of 9, but that figure is likely skewed higher because of releases of Windows and Office. In addition, it seems quite possible that Windows 8 will disappoint. We wouldn’t short the company at its current valuation either, but would need more confidence in its new releases before considering it as a buy.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!