With shares of technology super giant Apple Inc. (NASDAQ:AAPL) still at astronomical levels, investors may be somewhat concerned with the amount of runway left for capital appreciation from the world’s most valuable company. Apple continues to make up a large percentage of most indices, so buying an exchange traded fund (ETF) almost necessarily ensures ownership in Apple in this day and age.
Apple’s ability to grow its earnings and pump out what seems to be unheard of cash flow for shareholders has largely been tied to sales of the company’s core product, the iPhone. iPhone sales have recently accounted for roughly half of total revenue for the technology company. Some analysts are concerned that demand for new higher priced smartphones may be waning, particularly as we enter an uncertain time from an economic standpoint given the impact of this global pandemic.
Apple has been transitioning toward having a higher percentage of its revenue flow from services rather than products, but we’re still in the early stages of this transition. The company’s valuation relative to its growth rate has increased markedly, creating higher risk with respect to how Apple’s stock price may react to future volatility. Some believe this stock is priced for perfection. For those concerned, I’d suggest hedging one’s position or going with a balanced portfolio approach rather than a market cap weighted approach to limit concentration risk.
Invest wisely, my friends.
