Warren Buffett, the Oracle of Omaha, has repeatedly said that the time to buy is when there is blood in the streets. Of course, what he meant was that the best time to buy any asset is when the previous owners have been so badly hurt that their proverbial blood is running freely and they must sell to escape any more hurt. You can then find a bargain that will serve you well as an investment. In case you missed it, Friday saw Apple Inc. (NASDAQ:AAPL) hit a new 52-week low, bringing the slide from the historic high to about 40%. Translation: the bulls have been slaughtered in droves, there is blood in the streets, and it is about time to pick up some shares.
While capitulation is usually marked by a last push downward when the remaining bulls are driven from the market, it feels like what is going on with Apple Inc. (NASDAQ:AAPL) is the shaking loose of the last true believers. There is, of course, the possibility that there will be one more spike downward before a reversal takes place; I still see the stock touching $400 before it returns to $500. In any event, the carnage present in the stock makes a strong argument that it’s primed to perform and should be included in your portfolio.
A brief note on performance
While it is natural to think about Apple Inc. (NASDAQ:AAPL)’s performance from here in terms of its ability to return to the $700-per-share level or not, the underlying fundamentals of the stock are more important for the long-term investor — which Fools are. The stock’s price-to-earnings multiple has fallen below 10 on a trailing-12-month basis, which compares favorably to the P/E of 25 carried by Google Inc (NASDAQ:GOOG). Even flirting with $800, Google looks strong at current levels, making an argument that at less than 10, Apple is very cheap.
The mitigating argument to the Apple versus Google comparison is that with a dividend yield of 2.5%, Apple Inc. (NASDAQ:AAPL) is beginning to look more like a value stock. Google continues to fall squarely into the growth category, justified by such characteristics as its emerging markets strategy, the pending release of Google Glass, and the company’s aggressive push into new markets and new services. Apple has not been quite so aggressive, and yet has managed to amass $137 billion in cash, making it the target of a shareholder suit centered around returning more of that stockpile to investors.
If Apple Inc. (NASDAQ:AAPL) has fallen into the value category, its lower P/E would be appropriate, rather than evidence of its attractiveness. Still, Apple has enough growth characteristics of its own that an attempt to reclassify it is an academic pursuit at best. The stock is cheap at current levels.
