Those contemplating an investment in Quanta Computer Inc. (TPE:2382) is looking at the potential investment as a leveraged play on the upcoming Apple Inc. (NASDAQ:AAPL) watch, according to Charles Sizemore.
The CIO at Sizemore Capital Management told CNBC that a bet on Quanta Computer is a bet on the Apple Watch. However, investors should remember that the very healthy profit margins are ultimately for Apple Inc. (NASDAQ:AAPL).
“One thing to remember is that all of the fat profit margins goes to Apple. Quanta is very much a commoditized business here. […] They will never benefit from the iWatch to the extent that Apple will [benefit] themselves. This is very much a low margin commoditized business,” Sizemore said.
However, he noted that with that said, Quanta’s stock is “not super expensive right now” which points to the possibility that the market is not fully appreciating how big the upcoming Apple Inc. (NASDAQ:AAPL) watch would be for Quanta.
He said that if the Apple Watch will be as big as or bigger than expected, Quanta becomes very interesting. “It’s an interesting leveraged play on the Apple Watch,” Sizemore said.
Nonetheless, if Sizemore were to choose where to invest, he would directly buy Apple Inc. (NASDAQ:AAPL) shares, he said. This is because investing in suppliers of the iPhone maker is very risky investing.
“Personally, I prefer to stick with Apple itself. The suppliers are a much riskier speculation. One decision by Apple to go with a different supplier or to shift production around and you could be buried. You could lose your entire investment or potentially all of it,” he said.
With Apple Inc. (NASDAQ:AAPL), people will have the high margins, dividend growth and arguably the best stock in the world right now, Sizemore ended.
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