Apple Blurring Lines Between Growth, Value

NEW YORK ( TheStreet) -- I've got to admit that Apple ( AAPL) is starting to look somewhat interesting to this deep value investor. I'm not sure we are quite there yet, but it appears as though the growth crowd may be throwing in the towel. Many loved the stock at $700, at $600, and again at $500, but not so much at $400 and below.

That's one of the fascinating aspects of the markets and investor psychology; they'll love you until they don't, warranted or not. Is the April 2013 $400 Apple materially different than the September 2012 $700 Apple? Has the story really changed that much? Or is it the classic oscillation between greed and fear; where investors push stocks higher than is deserved on the upside, then push them lower on the downside?

I suspect part of the problem is Apple overexposure. Sure, there are reports of audio-chip gluts suggesting slower than expected demand for iPhones and iPads, profit growth is slowing, and some are calling for Tim Cook's head. However it's not as if the company's multiples were anywhere near ridiculous levels, even at $700. At that point shares were trading for around 16 times trailing earnings. While that may be a bit pricy to a cheapskate like me, it's not a crazy multiple, especially for a company that still has profit margins in the mid 20% range.

Now Apple is trading at 9 times trailing earnings, and if you consider that to be hindsight, consensus estimates for 2014 put the forward P/E at less than 8. If you don't trust the consensus, ignore it; use the lowest estimate for 2014 (EPS $40) and you still have a forward P/E just under 10. AAPL Chart AAPL data by YCharts

You won't find many balance sheets that are better. Apple ended 2012 with $39.8 billion or $42 per share in cash and short-term investments, and an additional $97.3 billion, or $103 per share in long-term investments. That's a total of $145 per share in cash and investments, and there's no debt on the books. AAPL Cash and ST Investments Chart AAPL Cash and ST Investments data by YCharts

This stock is simply not popular at this point, and everyone and their brothers are dumping it, and dumping on it. I honestly don't know when the carnage will stop. But it's beginning to get me interested and it takes a lot to get a value investor interested in what has long been considered a growth name.

Yes, the lines between growth and value sometimes blur, and investors will turn on formerly popular names quickly and aggressively. I saw it happen with eBay ( EBAYticker) a few years back, when that stock got cheap enough to buy, and the rewards were handsome.

So, Apple, I've got my eye on you. Where it stops, nobody knows, but I'll be waiting. The company is expected to report earnings Tuesday. I rarely pay attention to one quarter's numbers, but with such intense scrutiny of the name, it could be an exciting day. Consensus estimates are for revenue of $42.66 billion, and earnings per share of $10.12. Anything less could provide some fireworks, and perhaps a nice overreaction.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.