David Rolfe, the portfolio manager of Wedgewood Partners, has been generating a decent annualized return of 11.5% for his investors for the past twenty years, beating the S&P 500’s annualized return of 8.2% during the same period. With around $2.2 billion in total assets under management, he holds quite a concentrated portfolio. His three biggest positions are Apple Inc. (NASDAQ:AAPL), Berkshire Hathaway Inc. (NYSE:BRK.B) and QUALCOMM, Inc. (NASDAQ:QCOM).
A Buy or a Sell?
Apple Inc. (NASDAQ:AAPL) was the biggest position in his portfolio. As of December 2012, he owned 401,515 shares of Apple Inc. (NASDAQ:AAPL), accounting for 9.9% of his total portfolio. In the second quarter earnings results announcement, Apple Inc. (NASDAQ:AAPL) said that it would return as much as $100 billion to its shareholders in both share buybacks and dividends. The dividend increased to $3.05 per share, whereas the authorized buyback amount rose by $50 billion to $60 billion. Moreover, Apple Inc. (NASDAQ:AAPL) has issued $17 billion in bonds with a very low cost to finance its capital allocation plan. After that, Apple Inc. (NASDAQ:AAPL)’s share price shot up by 16%, from $390.50 per share to as high as $453 per share.
Goldman Sachs Group, Inc. (NYSE:GS) has rated Apple as a buy, and said that the recent significant rise in Apple’s stock price has been just a delayed reaction to its $100 billion capital allocation plan. Goldman Sachs Group, Inc. (NYSE:GS) also thought that a $17 billion bond issuance might make the market reaction more intense. Goldman Sachs’ Bill Shope has recently also rated Apple as a buy with a price target of $660.
Famous hedge fund manager David Einhorn also stated that he added more Apple positions in the first quarter 2013. He felt bullish on Apple’s new capital allocation policy and its innovative capabilities:
“This vastly more shareholder-friendly capital allocation policy is a dramatic shift from where AAPL stood just a few months ago. We have added to our AAPL position. We now await the release of Apple’s next blockbuster product.”
Apple is trading around $440 per share, with a total market cap of $412 billion. The market values Apple quite cheap at 6.7 times EV/EBITDA and only 0.55 times PEG.