For 2019, TheStreet has compiled a list of the top 25 stocks of the year, looking at everything from stock performance and quarterly results versus expectations to execution against strategy and each stock’s overall story.
After publishing round-ups for the 25th-ranked through the 6th-ranked stocks, we're now running individual articles on our top five picks.
In 2019, Apple dodged trade war bullets, grew its services and wearables segments, and made progress in persuading investors that it can prosper in a non-iPhone-centric world. And for all those reasons, it was voted TheStreet's Stock of the Year over many other worthy candidates.
The tech giant started the year on shaky footing, given a broader market plunge in December 2018 driven largely by trade uncertainty and other macro issues. And Apple’s unusual fourth-quarter revenue warning, which is issued in early January, had investors scrambling for answers on what the year had in store.
Since then, however, Apple has rewarded those who stayed the course. Apple (APPL) shares have steadily gained more than 70% throughout this year, well outpacing the broader S&P’s gain of roughly 25%. It’s also the top-performing FAANG name this year by a wide margin.
Since then, however, Apple has rewarded those who stayed the course. Apple (AAPL) - Get Apple Inc. Report shares have steadily gained more than 70% throughout this year, well outpacing the broader S&P’s gain of roughly 25%. It’s also the top-performing FAANG name this year by a wide margin.
According to Tom Forte, an analyst at D.A. Davidson, part of what influenced Apple’s stock performance this year was simply “low expectations.”
As trade tensions roiled the markets in late 2018 and throughout this year, Apple’s position in China -- both as to its manufacturing base and as an important sales market -- placed it in the unenviable position as a poster child of the U.S.-China trade war. Many investors worried that Apple could see punishing tariffs applied to iPhone imports, a consumer sales hit in China, or other unwanted secondary impacts. But so far, no such fears have materialized on a sustained basis.
“Because of its size in the U.S. and China, it’s arguably the only company that can lobby both the U.S. and Chinese governments,” Forte said. “They were able to dodge several bullets in calendar 2019 because of their influence.”
Playing the role of Diplomat-CEO, Tim Cook forged a productive relationship with the White House and found success in navigating Apple through several instances of tariff threats that would have impacted Apple products. Recently, trade negotiators announced a reprieve from a potential 15% tariff on consumer goods, including electronics, as part of an ongoing de-escalation effort.
Of course, there was a lot more happening with Apple than just trade issues.
Product-wise, Apple kicked its services segment into high gear the launch of Apple Arcade, Apple Card, Apple News+ and Apple TV+, These services are only a few weeks or months old as of December 2019, but they round out a growing slice of Apple’s services portfolio, which also includes Apple Pay, Apple Care, the App store and others. Apple also delivered strong growth in its wearables segment, anchored by strong Apple Watch sales, and released a new, Pro version of AirPods in late October.
“The maturation of the smartphone market has been the best thing to happen to Apple because it forced them to diversify,” Forte added.
Although iPhone sales are still the biggest line item in Apple’s overall revenue, investors appear confident in the power of Apple’s brand and product ecosystem to drive success in newer product endeavors, such as wearables and services.
As for what lies ahead in 2020, it’s looking like a different ballgame.
Expectations are quite a bit higher now. Next year, Apple investors will learn more about how some of its newer products and services are performing, and be able to further parse out what their contributions are to Apple’s bottom line. Apple is also due to release several new 5G-enabled iPhones, potentially at a wide range of price points, that could drive a fresh wave of sales.
But with a market cap of $1.24 trillion as of Dec. 16, Apple’s stock is a lot more expensive than it used to be. And another gangbusters year of 70% gains in its share price is far from a sure thing, noted Patrick Healey, president of financial planning firm Caliber Financial Partners.
“We’re in an election year [next year] and we’re going to see more volatility; I’d be hard-pressed to see them replicate that in 2020,” Healey said.