Popular business and finance magazine Barron’s has released its Top Pick list for 2021. Among other stocks, Apple features as one of its favorites.
Apple returns to the roster after Barron’s 2020 picks disappointed relative to the S&P 500: returns of about 10% vs. the broad market’s 17% so far. Will Apple help to make the new list a winner in 2021?
Why Barron’s likes Apple
The bullish case for Apple here is grounded primarily on the product portfolio. Few will disagree that Apple enters 2021 with one of the most impressive device lineups in a long time.
Barron’s highlights the iPhone 12, of course, reporting that Apple has been increasing production by 30% in the first half of the coming year. The Apple Maven covered the subject a few days ago.
But other products and services have made Barron’s list of noteworthy items. According to the magazine:
Lastly, Barron’s does not fail to mention concerns over valuation, calling shares historically expensive.
But it chooses to assign more weight to the bullish narrative surrounding the product offerings, rather than on forward earnings multiple of 32 times that looks rich – after outstanding share price performance in 2020. See table below.
What the Apple Maven thinks
I believe that Barron’s read of Apple is very reasonable. I, too, think that Apple is better positioned than it has been in a long time to spark demand in 2021. And it is not all about the 5G-capable iPhone.
At the same time, valuation is a concern that I share with Barron’s. But rather than looking at the 32 times multiple relative to history, I pay attention to Apple’s share price relative to the rest of the market.
The stock has been up nearly 40% per year in the past five years – about 80% annualized in 2019 and 2020 alone. Meanwhile, the Dow Jones Industrial Average, made up primarily of value stocks, has risen a much less impressive 14% per year over the past 24 months.
With the reopening of the global economy and the rollout of the vaccine next year, I think it is highly likely that value and smaller cap stocks will outperform. Should this be the case, Apple could fall a bit out of favor, and possibly struggle to keep up with the pace of the rest of the market.
Other Top Picks for 2021
Although this channel focuses on Apple stock, it was also interesting to see Barron’s other stock picks for 2021. A few caught my attention.
Barron’s likes Coca-Cola due to a combination of reopening trade (half of revenues come from restaurants, stadiums, etc.) and defense (3% dividend yield, better geographic diversification outside the U.S. than its peer PepsiCo).
Another interesting name mentioned was Goldman Sachs. The company has performed well in 2020, and it continues to morph into an institutional-consumer banking hybrid. It helps that valuation looks attractive, at a forward earnings multiple of only 10 times.
Read more from the Apple Maven:
(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)