I’ve officially put my money where my mouth is by purchasing Apple, Inc (AAPL) this morning at $170/share. I recommended them earlier at $200/share, and I stand by my argument. Granted, I had no idea it would make an afternoon run-up close to $180/share, but that is not the point. The stock may go lower, but here are a few reasons why I felt it was a good entry point:
Apple flat out makes money, and (in my opinion) has some of the most innovative and creative minds in the world leading the company. I don’t know how much the anticipated decrease in consumer spending will affect sales; however, a quick glance at the balance sheet and key valuation metrics had me sold.
They have roughly $15 billion cash on hand, a PEG ratio of 1.51, a trailing P/E ratio of 46 and a forward P/E ratio of 28. When the market stabilizes, a company like Apple will move towards it’s near perfectly estimated future value and trade at that value today. The market has priced them with a trailing P/E near 50 in the past. So, when I see the current valuation off in my estimation, I buy. I think Apple is worth roughly $215 a share in the short-term. However, they MUST continue to exceed Wall Street’s expectations.
The fears of a recession may contribute to an uncharacteristically high beta with technology companies like Apple, Google, etc—meaning: The stock may go lower before it moves higher, but I don’t care—I may hold them forever.
I currently own shares of Apple, Inc.