Big Day on Deck for Apple

 | Oct 21, 2013 | 3:00 PM EDT  | Comments
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Over the past 12 months or so, Apple (AAPL) shares have fallen back by over 30% as investors became concerned about Apple losing its innovative dominance and perhaps more so about its phenomenal growth rate slowing. There are certainly valid reasons as to why investors would come to this conclusion; the market is littered with relics of once-dominant technology innovators -- think Eastman Kodak, Palm and most recently BlackBerry (BBRY), just to name a few.

Perhaps Apple can never grow its sales and profits at the spectacular rates of the past, but that is more a function of its size than loss in innovation. Apple is set to host an event tomorrow that will likely unveil the release of a new line of products, most notably a new iPad. Similar to the iPhone 5s, I think the new iPad and iPad mini will reveal that Apple is still one of the premier innovators in the space.

The fact is tablet computers are growing at a phenomenal rate. Never mind the hundreds of millions of folks who use one personally, I was at a mall with my wife last week, and nearly every fashion boutique and high-end department store now utilizes an iPad or iPhone equipped to serve as a cash register. All these stores used iPads, nothing else. For instance, my wife wanted to purchase an item that was out of stock, and the sales associate simply handed her an iPad that opened up a virtual catalog so that she could buy the item to be shipped in two days (for free).

Apple CEO Tim Cook recently made an intriguing comment that since the iPad came out two years ago, Apple has sold 67 million units. By comparison, Cook said it took Apple over 20 years to sell that many computers. Apple is clearly the market leader with a 32% share. Of course, now tablets are a very competitive landscape, with Samsung, Microsoft (MSFT), and Amazon (AMZN) fighting furiously to dominate this lucrative market.

Apple remains a growth vehicle (albeit slower) and is also still a cash cow. It has a dominant franchise that it guards religiously. Users are extremely loyal. If the company continues using its prodigious excess cash flow to buy back stock and maintain a healthy dividend, shareholders will be treated to a very satisfactory return going forward for the next several years. Perhaps the returns will be nothing like the past, but Apple can delegate that by how it allocates its capital.

It would not be a surprise if Mr. Market sends shares lower after Tuesday's product event if the event doesn't meet all expectations. That again prove a timely chance for patient investors to really own what is now a safe blue-chip company with attractive growth and income characteristics.

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