NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.Among his posts this past week, Kass explained why he's buying shares of Apple and why some recent news from China is encouraging. Please
The Apple of My Buy
Originally published on Friday, Nov. 9 at 8:44 a.m. EDT.
- Global economic weakness in 2013 would likely have an adverse impact on Apple's relatively high-priced stable of products.
- Challenges of delivering a high-quality product in quantity.
- The risks associated with the loss of Steve Jobs were being underestimated by the markets.
- Investors may look beyond the recent new product offerings. The steady stream of "wow factor" products in the company's pipeline may be in jeopardy following the release of the iPhone 5 and of iPad mini.
- A changing competitive landscape could be a challenge to the company's market share and profitability.
- Apple's shares were overowned and were the beneficiary of fund flows. The almost religious belief in the company (on the part of individual and institutional investors) represented an extreme in investor sentiment.
- Apple's valuation, though inexpensive relative to the market and its projected growth rate, was very expensive (on a price-to-sales basis) relative to other hardware companies and on an absolute sales basis.
- 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.
Originally published on Friday, Nov. 9 at 7:14 a.m. EDT.