Nibbling on the Apple

06/06/2016 8:00 am EST


My entire investment career I have been able to find good buys and, despite this high-priced market, that is still the case, asserts value investor Russ Kaplan, editor of Heartland Advisor.

This is not, however, an easy time to be buying stocks; we are past the time in this bull market when an investor can just buy good companies and expect good results.

The good news, however, is that if you buy financially strong companies with good managements that meet value investing criteria, the long-term odds are in your favor.

Among individual stocks, we are nibbling on Apple (AAPL). In just a few years the stock has gone from being among the most popular stocks to being one of the most unpopular.

At current prices Apple is lower than it was when I first recommended it. What do we do when the price of a stock goes down? We reexamine the fundamentals.

Despite a disappointing quarter and the departure of legendary investor Carl Icahn in April, I still find Apple to be a good long term investment.

It trades at a very low price/earnings ratio of 10, is financially strong and has a high return on equity. It also pays an above average dividend.

The reasons behind the drop in price are overblown. One issue is China. There is fear that China’s economy is slowing down. Still, every year millions join the Chinese middle class and are able to purchase Apple products.

Another issue relates to new products. In a recent interview Apple CEO Tim Cook said that the company is constantly developing new products.

But any time a new product comes on the market, it takes time before the public starts buying it in volume.

Most importantly, Cook said that Apple is not the kind of company that can be judged on a quarter-to-quarter basis. This is definitely my kind of thinking. I think this is a good time to be averaging down or just plain buying if you don’t already own shares.

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By Russ Kaplan, Editor of Heartland Advisor

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