Pitching Apple (AAPL:NASDAQ) as one of our best picks for 2023 was based on a fairly simple investment premise – shares in a fantastic company had fallen too far after limping along for the best part of a year, and that had left them attractively priced versus prospects for recovery.When push came to shove, that anticipated bounce-back was faster and went further than we expected. To have a paper profit of 35% by early August means Apple can only be considered a big win for investors that followed our call to buy the stock back in December 2022.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

The tech giants have all seen a rampant recovery in 2023, partly thanks to AI (artificial intelligence) optimism but also because the market’s ‘year of efficiency’ focus with operating costs reeled in to bolster profitability, plus growing confidence that the Federal Reserve’s tightening interest rate cycle was nearing its end with the inflation monster seemingly tamed.

Yet we cannot hide from the fact that the next few months could be a touch tougher for Apple. We won’t repeat ourselves – we’ve looked at latest quarterly results from it and other big tech companies in a separate feature in this issue of Shares, but Apple commentary came across a little shy on confidence when it came to hardware sales.

WHAT SHOULD INVESTORS DO NOW?

The 2024 price to earnings ratio has inflated beyond 27 with analyst consensus anticipating less than 8.5% earnings growth.

Let us be clear – Apple remains a fantastic core investment opportunity long-term, with Services revenue and subscriptions very encouraging. There are other opportunities, such as personal banking, where Apple has gone from nought to $10 billion of savings in next to no time.

But taking some of that 35% profit off the table looks sensible right now, even if investors with a longer investment timeframe want to leave a rump stake in Apple. Think of it this way, you could sell two-thirds of your stake, covering your initial outlay, and giving you an effective free ride with the rest.

‹ Previous2023-08-10Next ›