The textbook definition of a moron is this guy:
Someone looked at his investments, looked at the price of Apple’s share, realized it was trading at $95.89 and decided it was time to sell.
Yes. Someone looked at his hard-earned money and decided to get rid of his shares of Apple at perhaps the most ridiculously-low price since the fabricated crash of late 2012. Someone decided to sell days away from its earnings release (on October 20), where analysts predicted record profits and at a period where Apple shares always rally.
If you had bought the shares on October 16, you would have made a 14% return by now. In a little under three weeks. That’s right, it’s actually possible for you to earn a 14% return in not even three weeks… Not by risking your money in some small-cap company dealing coconuts somewhere in Tanzania, but by investing in a company worth $634 billions and a market leader in almost every market it does business in.
If that’s still not enough for you, keep in mind that, at that time, Apple has just launched two new and massively successful products (iPhone6 and iPhone6+) that crushed all sales record. It had also announced an all new product in a totally new market (Apple Watch) as well as a very innovative payment system (Apple Pay). And if it had just announced its next line-up of iPads as well.
Despite all that, someone decided it was a good time to sell Apple.
Only a complete and utter fool sells in a dip and only a complete idiot sells one of the best company in the Universe in that very dip. Some people simply should not have access to a broker. What goes through the mind of these morons anyway? “Hum, Apple is widely successful and trades at a ridiculously-low price… Better sell! It’s clearly headed down!”
At $95.89, Apple traded at a P/E ratio (The price of the stock divided by earnings by share) of 14.9. And post-cash (that is, after removing the $160 billion Apple has in cash), Apple was trading at a P/E ratio of 10.2. You don’t need two masters to see Apple is clearly undervalued. To give you an idea, Google currently trades at a P/E ratio of 28, Netflix at 102.77, Amazon at… Amazon at something over 1,000, Johnson and Johnson at 17.1 and McDonald’s at 18.38.
Keep in mind Apple is still quickly growing and positioned in a market that grows 10%+ per year, far more than McDonald’s or JNJ. Can you say “undervalued?”
So what sense does it make for apple to trade at a P/E ratio of 10.2? None at all. Unless you expect Apple sales to crash by 33% (leading to a still very respectable P/E ratio of 15, not that it’s going to happen), you have to be one of the most retarded investors in the world to sell at such a ridiculously low price.
But ratios don’t tell everything, right? Well, at $95.89, Apple was paying a quite reasonable yield of 1.96% in dividend. Oh, and Apple has already increased its dividend TWICE in two years, once by 15.08% and another time by 7.87%. And the CEO has said they will be going for yearly dividend increases, which Apple will have no problems covering. Apple was also massively buying back shares, by far the best way to increase the price of a stock (in my moment), and has increased its stock-buying program last year. In short, it is quite shareholder-friendly.
What else does Wall Street wants?
A free iPhone for every ten shares you own? Profits that double every month? Six new iPhone models every week? An iPad that is self-aware? A MacBook Pro based on quantum computing? An Apple TV that can run without power? What will it take to satisfy these morons?
Apple is not done growing
If Alibaba is the King of the stock market (which it is), then Apple is the God of the stock market. It is quite simply the best company that has ever existed and without a doubt the best investment chance of our lifetime. And if you don’t believe me, keep in mind that if you had invested the price of the very first iPod ($399) into apple shares at the moment the iPod was announced (October 23, 2001, thus 325 shares), you would have $36,341 today ($35,100 in stocks plus $1,241) in dividends, roughly a 41% average return per year. Keep in mind this was for a large, reliable, well-established and powerful company, not some kind of small business ran on a countertop somewhere at some guy’s house.
And at a share price of $109, it still has a long way up to go in my opinion. Next stop: $125 by late January 2015.