Wells Fargo & Co (WFC), Apple Inc. (AAPL): Why You Shouldn’t Care About Rising Interest Rates

Investors have different points of view about Apple; some think that the stock is a bargain considering its brand differentiation, financial strength and future growth opportunities, while others believe it deserves its depressed valuation because the company has lost its innovative drive. That´s completely understandable, different opinions make a market, but saying that there is a bubble – excessive optimism – embedded in Apple Inc. (NASDAQ:AAPL)’s valuation just doesn´t fit reality.

Even Google (NASDAQ: GOOG), which has been enormously successful over the years is trading at a very reasonable valuation. The company is the undisputed leader in online advertising, and it has consolidated its position in mobile by owning the dominant operating system, Android, as well as several of the most popular cross-platform applications and services like Gmail, Maps and YouTube.

The company is building amazing technologies like self-driving cars and augmented reality glasses, so we could hardly say it has lost its innovative drive. Yet Google is trading at a forward P/E ratio of 16 times next year’s average earnings estimate; this may not be a bargain, but it’s certainly not a bubbly price for one of the most profitable and dynamic tech companies in the world either.

Bottom line

Forget about rising interest rates–focusing your attention on high quality companies to hold for the long term is a much more productive way to approach the market. Like Warren Buffett said, “price is what you pay, value is what you get.” Interest rate uncertainty can produce wild fluctuations in stock prices, but underlying company-specific fundamentals won´t change that much because of monetary factors.

Andrés Cardenal ows shares of Apple and Google. The Motley Fool recommendsApple Inc. (NASDAQ:AAPL), Google, and Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of Apple, Google, and Wells Fargo.

The article Why You Shouldn’t Care About Rising Interest Rates originally appeared on Fool.com and is written by Andrés Cardenal.

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