Apple Inc. (NASDAQ:AAPL) is Brookside Capital’s top stock pick. The tech stock makes up over 7.8% of the fund’s 13F portfolio, according to its last quarterly filing with the SEC. Brookside – Bain Capital’s public equity fund - focuses on long/short positions and uses fundamental analysis to invest across all economic sectors (see Brookside Capital’s favorite stock picks here).
After eclipsing the $700-mark in September 2012, Apple Inc. (NASDAQ:AAPL) tumbled to around $530 by the end of last year, but still managed to close the calendar up almost 30%. It’s been said on literally every channel out there, and repeatedly at that, but we’ll say it again: the stock is an excellent value opportunity. Apple trades at 12x earnings, where other major tech peer Google is at 23x and Microsoft is at 15x.
From a growth standpoint, Apple’s 5-year long-term EPS growth rate also outshines that of Google (13%) and Microsoft (9%), and what’s the cherry on top? Investors are severely discounting Apple Inc. (NASDAQ:AAPL)’s future growth prospects, as shares of the tech giant trade at a paltry PEG ratio of 0.6; typically any figure below 1.0 signals an undervaluation.
With close to $120 billion invested in its secret hedge fund, it’s quite possible that income-seeking investors could see a boost in payout over the next year or so. For those keeping score, Apple’s projected dividend yield (1.96%) still remains above that of the 10-Year Treasury (1.93%). Think about that for a second, and then think about this: Apple Inc. (NASDAQ:AAPL) has a bevy of growth drivers that can boost its shares to a fairer valuation, and they’re almost all product-related.
Some analysts estimate that an Apple TV would add at least 5-10% of upside to this year’s EPS estimates if Cupertino does release the device, and obviously, a low-cost iPhone would do wonders for the company’s exposure in emerging markets. Most of the recent hype has been about Apple Inc. (NASDAQ:AAPL)’s presence in the smart watch arena, but keep your eye on both of these potential developments. Billionaire David Einhorn of Greenlight Capital is one of the key investors owning Apple at the moment (check out David Einhorn’s top picks), and AAPL was also the No. 1 pick among the 400+ hedge funds we track last quarter.
What about the rest of Brookside Capital’s top five 13F holdings?