At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Apple Inc. (NASDAQ:AAPL) makes for a good investment right now.
Apple Inc. (NASDAQ:AAPL) was in 152 hedge funds’ portfolios at the end of the first quarter of 2016. AAPL has experienced an increase in activity from the world’s largest hedge funds recently. There were 133 hedge funds in our database with AAPL holdings at the end of the previous quarter. Based on these numbers Apple seems to be the 4th most popular stock among hedge funds. At the end of this article we will also compare AAPL to other stocks including Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT) to get a better sense of its popularity.
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It seems to us that nobody is more bullish on Apple than Wall Street analysts. Personally I am bearish. I believe Apple will face significant pricing pressures by the end of the next recession and may lose more than a third of its value. I don’t know when the next recession will happen, but that really doesn’t matter because I am a long-term investor. Most investors think they can get rid of their Apple shares before the company’s earnings decline materially but at the end of the day somebody will be holding those shares. By the way I am not a new Apple bear. I went on the record on CNBC last year when Apple was trading above $130 and Carl Icahn was pushing his $240 price target through the air waves. Icahn sold out of his $5 billion Apple position after seeing the first red flags.
Last week Jeffrey Kvaal from Nomura reiterated his buy rating with a price target of $120, yet he also warned investors about the risks of SE cannibalization: Here is what he said:
“The new iPhone SElaunch has proven more robust than we expected. Global lead times remain elevated and supply chain orders are rising.We consider this a mixed blessing as the strength likely includes cannibalization of the ever-weaker iPhone 6s. Leadtimes in the U.S. and China measured in days ahead of the March launch rose to 2-3 weeks by late April, where theyhave held. Greater China and the U.S. together represent ~50% of sales. We had initially anticipated 10-20mn in theSE’s first year; we now believe volumes will reach 30mn by year-end. Our checks imply that Apple has increased itsproduction forecast. Soft overall demand implies cannibalization in developed markets, China may be better. The handset upgrade rate for the U.S. operators reached a record low of 6% of the sub base in 1Q16. Typical upgrade ratesare ~8%.
