12/23/13
U.S. stocks continue to print higher record highs. Yet one of the most widely held stocks in the world, Apple Inc. (NASDAQ:AAPL) remains significantly off of its peak value of $705 per share, reached in late 2012.
I have been an outspoken analyst on Apple. I’ve followed Apple closely since its revival in the early 2000s, when the large hedge fund I worked for as an analyst owned Apple shares under $10.
For those of you that don’t know me, my online portfolio, called The Billionaire’s Portfolio, is made available for subscribers to piggy-back the world’s greatest billionaire investors. The portfolio has beaten the stock market in 2013 and has produced three triple digit winners this year.”
Now, more on Apple …
I was very bearish on Apple in late February of this year, an unpopular view. Apple went on to drop 25% in the following two months. I then flipped the switch a month later and said the bottom was in. Apple shares were trading $433.
Now Apple shares trade back above $500 and despite the persistent strength in the broad stock market, investors seem to lack similar exuberance for one of the leading brands in the world. Of course, Apple leadership has changed, and it’s highly anticipated product roll-out reportedly failed to impress investors. So for the first time in a long time, there is growing scrutiny surrounding the future for the company and the outlook of its stock.
Contrary to that scrutiny, I have become quite bullish on the stock and below are eleven reasons why I think Apple will reach $700 in 2014.
1) “Apple is cheap relative to its historical valuation. Apple’s average 10 year P/E ratio is 17.5 times earnings. At 17.5 times earnings this would put the stock around $700 a share.
2) Technically, Apple just completed a major trend break on a weekly chart which projects a price target for Apple of $680 to $700.
3) Apple has a higher dividend (2.27%) than both the S&P 500 Index (NYSEARCA:SPY) (1.93%) and Dow Jones Industrial Average (NYSEARCA:DIA) (2.25%). Therefore Apple is not only a value stock but also an income stock as well.
4) The world’s greatest investor and activist, Carl Icahn owns 3.9 million shares of Apple, and will continue to push the company to create shareholder value by forcing Apple to buy more of its stock back or pay out a special dividend.
5) According to Research firm Bernstein: Value based mutual funds have been buying Apple at a record pace. Now 36% of value based mutual funds with assets over a $1 billion have a position in Apple. That’s a 40% increase from a year ago.
6) Wall Street loves Apple. Of the analysts that cover Apple, 72% have a strong buy on the stock.
7) 75% of Wall Street analysts are projecting Apple to beat earnings expectations in December. That tends to kick-start momentum in a stock.
8) Apple is significantly cheaper than the S&P 500 Index. Apple sells for 13 times trailing earnings and 10.9 times next year’s earnings. The S&P 500 trades at 18.7 times trailing earnings and 15.9 times next year’s earnings.
9) Apple is the most loved stock by the “smart money.” According to Citigroup, Apple is the most owned stock by hedge funds.
10) Apple represents more than 12% of the Nasdaq 100, yet is lagging the Nasdaq 100 by more than 28% year-to-date. Expect hedge funds to buy Apple and sell the Nasdaq 100 Index in search for this gap to close.”
11) Tapping into emerging growth markets, Apple with its announcement of its China Mobile deal today, will now have access to billions of new customers which should help the stock grow its revenues and earnings over the next year.
We have been telling our readers since November of 2012 to sell gold on every rally and buy stocks on every dip. And I called the bottom in Apple as well. Furthermore, our process of buying the dips on the world’s best billionaire investors and hedge funds stocks picks has rewarded our investors with stocks that have doubled and tripled, including one stock that we booked a 240% profit on in less than 7 months.
Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor