Since I expressed my initial concerns in late September, Apple's shares have fallen by $165.
The shares now stand at $536, and I am buying.
Now let me explain why I have just purchased shares in Apple (my answers correspond to the list of concerns listed at the beginning of this column):
- As expressed in today's opening missive and in my writings over the last few weeks, I am now less concerned about a global economic slowdown than most.
- Investors are no longer smug and have grown increasingly (and arguably fully) aware of the challenges of the delivery of current and future new products.
- Apple's shares are no longer the beneficiary of fund flows -- just the opposite has been occurring, which has materially pressured the shares down to attractive levels.
- At $700, Mr. Apple Orchard -- er -- Mr. Market was likely imputing a 2013 new "wow" product (Apple TV?). At current prices, the next "wow" product has been discounted away, and the company's completely refreshed product line (no mean feat in such a short time frame, and if supply comes in line, CEO Tim Cook's main goal for 2013) should be plenty enough new stuff to once again propel earnings throughout 2013. Also, here is a link to AppleInsider, which hints about a possible new product associated with the automotive industry.
- At $536 a share, a discounted dividend model implies that the future growth rate in profits at Apple will be only about 5%. This is too low -- Apple's share price decline has likely now overly discounted most (if not all) of my concerns.
At the time of publication, Kass was long Apple.
Originally published on Friday, Nov. 9 at 7:14 a.m. EDT.
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