I’m one of the biggest bulls on Apple (NASDAQ:AAPL). I do think this company makes for an excellent core portfolio holding, long term. If you’re an investor with any technology Exchange Traded Fund (ETF) exposure or market ETF exposure in the U.S., you probably already have a significantly amount of leverage to Apple Inc.’s share price. Investors should consider the level of risk associated with such a position.
The main proponent of the bear case against Apple is its valuation compared to its earnings growth. The vast majority of Apple’s share price increase over the past couple of years has been due to valuation expansion rather than earnings growth. The company’s valuation has recently seen new highs the company hasn’t seen in a long time, based on certain metrics. Many times, the core fundamentals of a group of companies, no matter how high the quality of the companies, becomes detached from the valuations investors are giving these stocks. Investors ought to be aware of the potential of downside risk on the horizon.
Some analysts suggest that, on a fragmental basis, Apple’s share price could be overvalued by 30-40%. This is a significant amount of downside that should be taken into consideration. Apple is a forever stock, in my view. But sometimes, even the best companies can be become too expensive. I’d encourage any investor to do their homework before blindly investing in a company.
Invest wisely, my friends.
