$820 — that’s the cost Samsung Electronics Co., Ltd. (KRX:005930)’s latest flagship phone, the Galaxy S4. For the price of roughly two shares of Apple Inc. (NASDAQ:AAPL), an investor in the Cupertino tech giant could save themselves thousands of dollars in potential capital losses.
Most investors continue to underestimate Apple’s problems — that is, how far it’s fallen behind its once-upstart rivals.
Why Apple still isn’t cheap
Ahead of Apple Inc. (NASDAQ:AAPL)’s recent earnings report, I wrote a piece titled “Why Apple Still Isn’t Cheap.” My article garnered nearly universally negative responses, most of which were nothing more than ad hominem attacks.
Of course, the negative responses only emboldened my original thesis — that there were many investors out there who continued to cling desperately to their Apple Inc. (NASDAQ:AAPL) shares, lashing out angrily at anyone who would dare to question their darling stock.
Famed bond investor Jeff Gundlach made a similar point on CNBC earlier in the year.
“Listening to people talk about Apple, I’m still impressed with the obsession with people have with — do I buy it now that it’s down a little bit? Institutional hands, have they sold it? Do they own it? This is not the type of talk that goes on at a real, enduring bottom in an asset class or stock.”
Gundlach was ultimately right. At the time he gave that quote, Apple Inc. (NASDAQ:AAPL) shares were trading above $480 — later dropping below $400 earlier in April.
Apple is an iPhone company
Although Apple makes a fair number of products, the company is largely dependent on just two: the iPhone and iPad. (This is in line with Steve Jobs’ philosophy of a laser-focused company.)
And of those two, the iPhone dwarfs the iPad in terms of importance. In Apple Inc. (NASDAQ:AAPL)’s last quarter, the iPhone brought in roughly twice the revenue of the iPad — and the iPad itself brought in more revenue than everything else combined.
Consequently, all things considered, Apple is really a story about the iPhone — everything else is fluff.
The iPhone is facing serious headwinds
That brings us back to the $820 every Apple investor should spend on a Galaxy S4. Those investors will discover a device superior to the iPhone.
When Apple introduced the iPhone back in 2007, it was truly a revolutionary product. It went on to completely disrupt the phone market, creating a new standard for smartphones and largely eroding