Apple Stock News

Opinion: If you don’t buy Apple’s stock today, you’re crazy

Apple Inc. bounced back on Monday as bold investors used a decline of up to 13% earlier in the day to buy the iPhone maker’s stock on the cheap. As the saying goes, “be greedy when others are fearful.”

Those who were gutsy enough were rewarded, but bargain buys don’t necessarily have to be high-stress swing trades designed to make money in a matter of minutes. Some of the most profitable purchases for value investors can be long-term positions initiated in good stocks during a bad market environment.

The stock market seesawed on Monday, with a decline of over 1, 000 points in the Dow Jones Industrial Average at the opening bell. The blue-chip index clawed back some 400 points by the closing bell. Apple, even after it pared losses, ended up down 2.5% to $103 for the day. Its 2015 high is $135. So it’s still a huge bargain, and that’s why investors should buy with confidence before Apple AAPL, +1.80% starts marching steadily higher.

Besides its inexpensive stock price, here are five reasons why Apple is an attractive long-term investment:

China fears are overblown: In its fiscal third quarter, Apple boosted China sales by 112%, from $6.23 billion to $13.23 billion. Even more impressive is that operating income from the region expanded at an even faster clip, about 147%. That’s very fast growth, to be sure. The fear is that Apple’s increasing reliance on the region will result in big pain for the rest of the year as long as China’s economy struggles. But there are reports that demand remains strong for Apple products, including some rare mid-quarter commentary from the company. CEO Tim Cook told investing icon Jim Cramer that iPhone activations in China have “actually accelerated” and that “China represents an unprecedented opportunity over the long term.”

IPhone negativity is ‘baked in’: When the oversized iPhone 6 and iPhone 6 Plus hit the market last fall, they released a ton of pent-up demand. And thanks to those difficult comparisons, some analysts are calling the success “unrepeatable” — and thus predicting 2016 may be the first year that iPhone sales decline instead of grow. But consider that the negativity has now pushed Apple to its cheapest valuation in years, with a forward price-to-earnings ratio of about 11, and a forward price-to-sales ratio of about 2.5. Apple isn’t some stock trading at a huge premium with no room for error after these declines; investors clearly are pricing in the iPhone challenges.

Investing in a frantic stock market
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Crazy return of capital: A headline dividend yield of just less than 2% doesn’t sound like a lot. But taken alongside an ambitious repurchase plan, it’s clear that company executives are committed to returning as much capital as possible to stock holders. Consider that in its fiscal third quarter alone, Apple deployed $13.8 billion in buybacks and dividends. That’s enough to buy Pandora P, +1.26% BlackBerry BBRY, -0.74% and FireEye FEYE, -1.31% in case you’re curious. That kind of ambitious return of capital isn’t only good for shareholders practically, but also philosophically because it proves management has investors’ interests at heart. Over the long term, dividends and buybacks like this are sure to benefit Apple shareholders in a big way.

$200 billion in cash: These are active strengths of Apple, but the passive strength of having about $200 billion in cash and investments in the bank should not be forgotten. Yes, deploying that cash would incur some taxes or other costs, but that stockpile is nearly a third of Apple’s market value — and actually keeps growing despite the big dividends and buybacks. Investors should consider this cash, at worst, a massive hedge against future declines, but also dry powder for future deals, or fuel for bigger dividends or other ambitious efforts.

Apple benefits from a ‘flight to quality’: Many momentum stocks have taken it on the chin in recent days. But some of the better names on Wall Street, including Apple, managed to show their strength. Take Monday, when a massive sell-off at the open pushed Apple briefly down 13%, but by the closing bell, it was only 2.5% in the red. That kind of movement shows that negative overreactions in Apple are truly a buying opportunity, not a sign of trouble. Investors today are worried about fast-growth stocks losing their grip as sentiment rolls over, and a rock-solid mega-cap such as Apple with a bulletproof balance sheet is a great place to stash your cash. Apple will continue to prove that its stock will remain a safe haven regardless of Wall Street’s gyrations.

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