Wednesday, July 20, 2011

Lessons From an Apple Investment

If you own or watch Apple stock, you know the company simply crushed analysts' estimates for the past quarter.
It was just three months ago that I abandoned my long-held prejudice against the stock (which I detailed here), and took my first bite of AAPL. Two more buys followed as it slumped to $315.
I was elated to see the company do what I thought it would on Tuesday. Announcing financial results beyond what anyone paid to analyze the company was expecting has become the Apple routine. And not by a little, but by a mile.
Apparently, I was right in my sober assessment of the company this spring, when I decided it just looked to cheap to pass up.
Score it a win, at least for now.

Tuesday's results also had me thinking about what other lessons I could take from my Apple ordeal.
It has me considering two things:
  1. Are there any other companies out there that I had at one time been considering, but then wrote off because I'd "missed the move" up? I very well could have other winners sitting right under my nose, but long ignored or willfully abandoned the way Apple had been.
  2. Are Apple's shares still cheap at $390 or more?
Buying more Apple up here at first seems ridiculous to consider, especially since the stock was just sitting at $315 three weeks ago.
But Apple still sells at a meager 18.5 price-to-earnings ratio, with these growth numbers:
  • Sales up 82 percent. 
  • Quarterly net income doubled. 
  • Cash flow up 131 percent.
That's pretty strong growth. A smaller company would likely be commanding a much higher price.

I'd been resiting adding to my Apple shares because the company now makes up more than 12 percent of my portfolio. But maybe I'm constraining myself on that, keeping myself on a leash that just can't reach another solid investment sitting right in front of me.
At near $400, I may remain weary. But on a pullback, I could be an Apple buyer yet again.
Until then, I'll be content in knowing I made a good choice in the spring and continue looking for good opportunities.


  1. I've also owned Apple for awhile now. One investment analyst I follow (for a subscription) is looking for +$450 within 18 months - he's usually proved a bit conservative! Also, here's an AAPL article written by someone else: