Apple stock price hit an all new high.
Yea! Cue the people who know me rushing to ask me if I should invest in Apple stock.
I’ve written about this before, of course. I also wrote about that Apple earnings miss that made everyone freak out a while back. I took a look and saw that I wrote an Amazon stock vs Apple stock article. I’ll have to re-read that when I get a chance and see if I was right 🙂
As was the case when I wrote those finance articles about Apple, the reality is that there isn’t much different about Apple stock today, that wasn’t also true yesterday, and a month ago. So, just because there is a BIG NEWS story today shouldn’t change your investing strategy.
Keep in mind, that this all new high isn’t the result of FINALLY breaking through a long losing streak. The last all-time high for Apple stock was back in 2015. It’s been a few years, but it’s not like this is a long suffering stock, or anything.
Is Apple a Buy Here?
For years, betting against Apple has been a sucker’s bet. The company seemingly could do no wrong. Even when it did wrong, the conventional wisdom was that it was temporary and they would figure it out and start doing right again. There are still plenty of people that believe that, but it isn’t a universal thing anymore. There are rumblings that Steve Jobs really was the juice behind Apple, and that Tim Cook doesn’t have that juice.
A lot of that comes from the fact that Apple’s “new” products for the past few years have really been nothing more than incremental upgrades. A friend of mine who I’ve known for some time, and who immediately pre-ordered every new upgrade to the iPhone the day it was announced, ended up finally sitting out the iPhone 7 because there just wasn’t anything he needed, or wanted on it.
The same story is true of the iPads. Surveys show that plenty of people are running years old iPads with no intention to upgrade.
The upgrade to the company’s MacBook was met with rumblings of disappointment over a very minor feature upgrade (the touch bar) and what many felt were insufficient hardware upgrades.
Does this mean Apple is finished? Hardly, but maybe it isn’t as magic as it was.
Why Is Apple Stock Up?
So, if that’s all true, why is Apple stock up?
There are a lot of reasons, some more real than others. First, and foremost, Apple has embarked on a huge share buyback program, just like IBM has spent the last couple decades doing. Like IBM’s massive share repurchases, Apple’s $70 billion buyback has removed so many outstanding shares from the market that things like Earnings Per Share are going up, even if revenue isn’t.
You see, earnings per share is a division problem. Removing, or buying back, shares lowers the divisor. Divide by a smaller number, and your result is higher. Apple has lowered the number of outstanding shares by 6 percent, which is a LOT.
Don’t forget that Apple’s board of directors actually cut Tim Cook’s pay for poor performance just last year, so it isn’t all rainbows.
Here is a pretty good explanation of what I’m talking about.
If this is all true, then why is the stock price going up?
Remember that stock prices are based on the FUTURE. After all, you don’t want to buy stock today for $133, and then have it not go up. The point of buying it for $133 now, is that you think it will go higher in the future.
Why do people think that?
Well, there IS a new iPhone coming, and people are convinced that this one will be a bigger deal than the iPhone 7. Goldman Sachs things there will be “3-D sensing technology”, which might be awesome. Remember, Apple’s fan base is loyal and rabid. It won’t take too much to get them out there buying and creating record iPhone 8 sales, especially since many of them are sitting on aging iPhone 6s.
And, while last year’s MacBook was a bit of a bust, rumors are that the company is going back to juice it up some more. If that happens there is TONS of pent up demand from a developer community that wants/needs more powerful MacBooks and are just BEGGING for the opportunity to buy them.
Last, but not least, President Trump has talked about some sort of tax holiday or tax break to allow corporations to bring offshore funds to the U.S. at a huge discount. No one has more money sitting overseas than Apple, so anything along those lines would be a huge boost for the company.
So, is Apple a buy?
You should not be buying individual stocks unless you have an investment account with $100,000 in it. (This is in addition to your regular savings!)
You should not have an account like that unless you are already maxing out your 401k and IRA contributions (and 529 contributions if you have kids).
If, and only if, you meet both the above requirements, chances are pretty good that at least one of those three things are going to happen and when they do, the stock will likely pop. And, while you wait, the stock is still paying a 1.7% or so dividend, which is better than a savings account. So, if you’ve got a slot for a tech stock in your portfolio, you have plenty of time to wait out any ups and downs, and you’re looking to go aggressive, it’s probably a buy.
This is not a recommendation to buy or sell securities. This article is for informational purposes only and is not an offer to buy or sell securities. The author does not hold himself out to be a financial advisor or financial planner and is not a licensed broker. Talk to your tax and financial professionals for advice specific to your own personal situation. The author owned shares of Apple stock at the time this article was published, but that can change at any time without notice.