Apple’s a Buy at this Price

02/15/2013 11:15 am EST

Focus: STOCKS

Jack Adamo

Editor, Jack Adamo's Insiders Plus

Jack Adamo of Insiders Plus thinks Apple can still produce—new products, as well as market returns.

Apple (AAPL) recently fell more than 12%, after posting a 1% increase in adjusted earnings on 18% higher revenue. (GAAP earnings were actually down 0.4%.)

The concerns about Apple are real. It is facing very tough competition on the iPhone front from strong companies like Samsung (SSNLF), which uses Google's (GOOG) Android system. The company is also facing growing competition for its iPad from the same companies hitting it on the phone side.

Apple is also rumored to be contemplating a cheaper version of the iPhone to get a piece of the low-end market. I think this would be a huge error. Apple has a strong panache factor and rabidly loyal fans. If it goes down market, it may lose that.

That said, the stock is now selling for eight times earnings. The company has no debt, $40 billion in cash and short-term securities on its balance sheet, strong cash flow, and a 2% yield. The payout ratio this quarter was 19%, so there is plenty of room to grow the dividend.

In addition, iTV is probably going to come out sometime this year. Will it be a smash? I have no idea, and with guru Steve Jobs gone, the market is not giving the benefit of the doubt to new CEO Tim Cook. However, if it is a modest success, that will certainly help the bottom line. I also expect the iPad market to continue to be lucrative, despite competition.

In short, if Apple turns into a slow grower like Microsoft (MSFT), the stock is still a good value here. That's not to say the market will see it that way. One can never tell what Market will do, but there’s a lot of negative sentiment about the stock now. Any good news could boost the shares quite a bit.

Let us take a small contrarian position. Buy Apple. Take a 2% position in our Main Portfolio.

Subscribe to Insiders Plus here...

Related Articles:

A Paradigm Shift for Apple

3 Things to Love About Apple

One Bad Apple

Related Articles on STOCKS