With Apple's (AAPL) just-released announcements of new model iPhones and iPads, now is a good time to take a new look at this technology behemoth. From my vantage point, taking a bite now -- the Bible's warnings against forbidden fruit notwithstanding -- makes a lot of sense. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
The company keeps rolling out new and improved products, including the iPhone SE, which has a retro 4-inch screen and sells for a competitive $399. Apple does not skimp on what it takes to keep its products in the market's forefront, and Apple's leadership in the consumer tech product market looks secure.
True, Apple faces headwinds, making it the target of many naysayers. IPhone unit sales may decline this year for the first time, and the Apple Watch seems to have generated limited excitement in the marketplace. Morningstar just reported that in the year since Apple joined the Dow Jones Industrial Average, its stock price has declined 18%, suggesting the market has factored into the price the challenges Apple faces.
My analysis suggests the stock is currently well priced. To choose recommended stocks, I rely on a number of guru strategies I created based on some of Wall Street's greatest thinkers. A strong recommendation from one strategy is enough for me to report to you on the stock earning that commendation.
Apple has strong recommendations from two guru strategies.
The strategy I base on Warren Buffett's approach to investing is an Apple fan. Reasons it likes the company include: a strong market position, steadily rising earnings per share (EPS has gone up in nine of the past 10 years), modest levels of debt, high average returns on both equity and total capital, and a projected annual rate of return to stockholders of 17.3%.
The strategy I modeled after the writings of Peter Lynch is also an Apple supporter. This strategy's most important variable is the P/E/G ratio, which is price-to-earnings relative to growth, and measures how much the investor is paying for growth given today's stock price. A P/E/G of up to 1.0 is acceptable and below 0.5 is considered exceptional. Apple's stock is in exceptional territory, with a P/E/G of 0.48. As I noted above, the stock is well priced.
Despite the company's detractors, Apple remains the world's leading tech company and it has a reasonable stock price. You may not be an Apple product user, but its stock can still be an important contributor to your investment portfolio's performance.
John Reese and his clients are long Apple.