The fifteen percent plunge in Apple stock price is all the news lately as most journalists have concentrated on the dramatic size loss of market capitalisation.
This of course will always happen when you’re talking about an elephant with a market cap of over $600B before its recent drop.
However, as long term investors and swing traders, these are the opportunities we patiently wait for, unless of course you truly believe that Apple will be all downhill from here. Personally I don’t.
The following is what makes me want to add Apple to my long-term portfolio over the coming days. I already hold a position in Apple (AAPL) and have been waiting for the chance to buy more as a value investor.
Please note, I am both a long-term deep value investor as well as a medium-term trader who utilizes the combination of both fundamental, technical and macro analysis to form a view of every investment I make. Doing so I believe leads to low risk and superior market beating returns over the long run.
Apple has recorded lower than expected earnings for the second quarter and its first ever quarterly revenue decline in thirteen years.
There is concern in the market whether Apple has outgrown itself and the best days are now behind it after the release of iPhone 6 last year.
There is also the challenge of continued declining Chinese demand and the recent banning of certain applications such as Apple Movies (iTunes) and Apple Books (iBooks) within greater China.
Intrinsic valuation of $130-$140 (approx.), so AAPL is well undervalued after the recent price drop and there is a significant margin of safety.
Earnings per share (EPS) has been good for the past 5 years and is forecast to increase.
Return on Equity (ROE) of over 35% is excellent and forecast to remain stable.
Long-term cash flow relative to reported profits is strong.
Apple has a long term funding surplus.
There seems to be a total disregard of other emerging Apple products and services like Apple Watch and Apple Pay which will become much bigger earning segments over time.
Recently broken below the $95 key price support level.
Currently below both 20, 50 and 200 day moving averages.
The stock is oversold on a variety of momentum indicators and buying volume is above average over the past week.
It is likely that value seeking fund managers like myself will take advantage of a highly undervalued Apple.
For longer-term investments, I generally like to see who else is on-board with me and where the smart money has found its home.
In my opinion, actions always speak louder than words. Apple is one of the most widely held stocks by smart money.
Although Carl Icahn recently commented that he had completely dumped Apple stock to lock in his $2 Billion dollar profit due to his concerns over ongoing Chinese issues, SEC filings continues to show many other world-renowned deep value investors holding significant stakes above 5% of their portfolio.
David Einhorn – 12.12% of portfolio managed
Zeke Ashton – 11.7% of portfolio managed
Chase Coleman – 8.97% of portfolio managed
David Rolfe – 8.74% of portfolio managed
Julian Robertson – 5.56% of portfolio managed
The recent 15% price fall in Apple has brought the stock well below valuation and with a huge margin of safety for a fundamentally strong company with incredible market loyalty and wide smart money support.
Although there is always a probability that Apple may drop a little further, I will be personally adding more Apple into our long-term portfolio over the next few days when volume for Apple stock continues exceeding normal volume and there is price reversal evident to confirm ongoing buying demand.
Be greedy when others are fearful and fearful when others are greedy. This is the time to be greedy.
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