Buy Apple as it is forming a bottom

Despite skeptics, there are several reasons to believe the drop in the stock is close to an end.

By TheStockAdvisors Apr 19, 2013 9:41AM

Arrow Up © Photodisc SuperStockBy Ian Wyatt, Top Stock Insights


I want to go on the record that I think this is a bottom for Apple (AAPL) and that now is perhaps the best time in recent years to buy the stock.


There are three reasons that Apple stock is attractive today -- the firm's upcoming quarterly earnings, new products on the horizon, and the company's pro-shareholder philosophy. Plus, the shares are cheap.


Reason 1: Earnings

On April 23, Apple will report earnings for the fiscal second quarter. I believe expectations are low for Apple. Four out of the last six times that Apple has reported earnings, the company's performance has fallen short of analyst expectations, and the stock has been punished.


This past performance means that many investors expect Apple will not perform well when second quarter earnings are reported -- setting a low bar -- and potentially making it easy for Apple to exceed those expectations.


Reason 2: New products

While Apple doesn't pre-announce product launches, there is reason to believe that a new version of the iPhone is coming this summer and a lower-priced iPhone for international markets may out soon too. Additionally, there is speculation about an iWatch and the long awaited iTV in 2013.


While the launch of the iPhone 5 and iPad mini were disappointing to many observers, these new products could breathe some life and excitement back into Apple, bringing investors back into the stock in a big way.


Reason 3: Pro-shareholder

Earlier this year, hedge fund manager David Einhorn proposed a new class of Apple shares in an effort to get the company to return its cash hoard to shareholders.


Apple CEO Tim Cook didn't want to be told how to run his company by a NYC hedge fund manager.  But now that the dust has settled, Cook may announce "pro-shareholder" steps including a larger share buyback or an increase in the dividend. These actions could send the shares higher.


Finally, the best reason to buy Apple is that with the stock trading at 6.4-times expected 2013 earnings, the shares are cheap. It is one of the least expensive stocks in the S&P 500 index on a price-to-earnings basis.


The market is pricing Apple as though it's one of the least desirable companies one could own. My experience as an Apple customer makes me believe that the low valuation isn't justified.


If you don't own Apple, buying the stock before April 23 when earnings are released could be a great investment. Many investors were willing to pony up $700 for the stock seven months ago . . . now, nobody wants it.


This doesn't make much sense. My personal view is that Apple shares could return to $700 within the next two or three years, making the risk-reward opportunity extremely attractive right now.


More from TheStockAdvisors.com

Tags: AAPL
12Comments
Apr 19, 2013 11:27AM
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You cannot possibly write an unbiased article as a an Apple Shareholder. While Apple was an innovator their are so many other products on the market at lower prices. Perhaps the iPad is slightly superior, but really, who cares anymore.

 

Apple has passed its prime and I say that as th shares are climbing. The cheerleaders always have some motive for their actions.

Apr 19, 2013 12:33PM
Apr 19, 2013 1:03PM
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When AAPl was 550 I read that are cheap , when they were 500 Cramer wrote that they are very cheap. Now is 400 and going down and thy suppliers are cutting down outlook. Now they try to copycat China making Iwatch . To late
Apr 19, 2013 11:27AM
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I have a buy limit order in at 368.  Hoping for a washout after earnings.
Apr 19, 2013 2:05PM
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last year everyday I would take the train to NYC across the river from Jersey, I would sit amazed at all the people hacking away on their IPhones.
Fast forward to today.  Everyday I take the train to NYC across the river from Jersey, I sit amazed at all the people hacking away on their Samsung Galaxy phones.
Apr 19, 2013 1:00PM
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They even stole their name from the Beatles' record company. They should change it to rotten apple. They are a communist Chinese sellout. Sorry fad followers.
Apr 19, 2013 1:04PM
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Lets see if I buy ten whole shares that's only a little under $4k If it goes up 10% I'll make a little under $400 WOw such a deal.....

 

Now if I had WBs $$$$$ then maybe I could invest with out tapping my inheritance and my kids college fund....and my retirement....and all of my insurance policies, and any credit cards I could max out...

Apr 19, 2013 1:00PM
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hey dude, i know some folks who bought aapl stock for about $700 per share.  since your "personal view" is that it could return to $700 in the next two or three years, why not buy their aapl stock now for $700 per share?  do that so they can buy other stocks that have the potential to rise significantly, NOW, as opposed to waiting two or three years from now!  sounds like another investor who lost his shirt on aapl, and now will say anything to folks hoping they will buy the stock so it can go higher and he unload his shares!
Apr 19, 2013 11:48AM
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Idiot. This sweat shop Gestapo-like toilet called AAPL is DOA pal. Too bad for all of the nerds on this planet. As for you sir? Get a real job. 
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