Apple Inc. (AAPL): First Growth, Then Value, Now Income?

Even with the recent decline Apple Inc. (NASDAQ:AAPL) has more than tripled in the last five years, going back to March 2008. This has been due to the enormous growth of Apple’s business. In the fiscal year ending in September 2008, the company’s sales were a little over $37 billion and net income was $6.1 billion. Fast forward to the most recent fiscal year and revenue had risen by a factor of 4, with net margins actually increasing to the point that earnings for the year were $42 billion.

The decline in Apple’s price, and more generally the fact that the stock price has actually underperformed the business, made the stock an intriguing choice for many value investors and analysts (including us at Insider Monkey, particularly after the fall in the stock price had initially begun). However, the value thesis from Apple Inc. (NASDAQ:AAPL) has not played out at all as the trailing earnings multiple has fallen from about 12 or 13 to around 10 at present.

A number of hedge funds, who often invest from a value perspective, sold out of the stock in the fourth quarter of 2012, and while of course Apple was still on our list of the most popular stocks among hedge funds, it lost the #1 slot to American International Group Inc (NYSE:AIG). We pay attention to hedge fund positions because our research has shown that imitating hedge funds’ top stock picks generally outperformed the market.

Of course, even if Apple’s business isn’t growing it is still huge, and with very little necessary capital expenditures the company has produced enormous cash flows. The most recent 10-Q shows $137 billion in cash, cash equivalents, and marketable securities on the balance sheet following a quarter in which cash flow from operations was over $23 billion. Billionaire David Einhorn of Greenlight Capital, who was actually buying shares of Apple Inc. (NASDAQ:AAPL) last quarter has only been the most prominent of a number of players urging the company to return the cash to investors. Bloomberg recently surveyed several analysts who speculated that the dividend may be lifted to a quarterly payment of $4.14 per share, which would make for an annual yield of 3.6% at current prices.