Bill Miller, legendary value investor and portfolio manager at Legg Mason Capital Management, has taken a big bite out of Apple Inc. (NASDAQ:AAPL) stock. He sees a number of positive catalysts for the company, including an impending major capital allocation move, in addition to a valuation profile that is too good to pass up. Miller is widely known for bravely going where few investors dare, to jump into some of the market’s unloved and unwanted stocks. Should you follow him into Apple, the technology sector’s ugly duckling?
A balance sheet that’s anything but a rotten apple
You’ve probably heard about the issues dogging Apple Inc. (NASDAQ:AAPL) since it briefly became the world’s most valuable company by market capitalization. A mix of fears regarding stiffer competition going forward in conjunction with the potential for lower profit margins has proven to be a toxic combination for what was once the market’s darling stock.
However, Miller believes there’s still a lot to like about Apple and articulated his position on CNBC. First and foremost, he believes the company will make a major strategic shift in its capital allocation policy. Apple Inc. (NASDAQ:AAPL) has $137 billion in cash and marketable securities on its balance sheet, amounting to $146 dollars per share. Miller believes something big is in the offing, likely suggesting Apple will issue a massive special dividend, increase its regular dividend, or announce a large share repurchase. Indeed, Apple’s gigantic cash hoard is an advantage the company holds over virtually every other technology firm.
Competitor Research In Motion Ltd (NASDAQ:BBRY) has stolen a good deal of Apple Inc. (NASDAQ:AAPL)’s thunder over the past few months. After being left for dead by the market, Research In Motion Ltd (NASDAQ:BBRY)’s stock has doubled from under $7 per share to its current level. The company got an additional boost when it revealed that it had received the largest ever single purchase order in its history. Research In Motion Ltd (NASDAQ:BBRY) said one of its established partners had placed an order for one million of the company’s new BlackBerry 10 smartphones, with shipments to being immediately.