The Apple of Our Eye

11/28/2012 7:30 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

There are plenty of reasons to love this company, and the underlying trends will last for years, writes Ian Wyatt of Top Stock Insights.

We love Apple (AAPL). It's a great company and a beacon of innovation for the entire technology industry.

As for the stock, we previously asserted that the shares were extremely cheap. However, we suggested waiting until the stock dropped down to $550 before entering a new position. That has now happened.

The shares have fallen by more than 20% in about a month. We think the recent selling is completely unwarranted and is instead a result of profit-taking ahead of a potential tax hike. This means that the recent move lower has almost nothing to do with the fundamentals of Apple's business operations.

Apple stands to clean up from one of the biggest trends in the world—smartphones. Data compiled by Barron's shows that smartphones have decimated PC growth since 2008. Moreover, unit total and total value of sales is higher than that for PCs for the first time.

There's no doubt the "smartphone revolution" stemmed from Apple, which sold more than 20 million iPhones in 2009. Apple increased that amount to 39.9 million units in 2010 and 72 million units during 2011. Management expects to sell nearly 125 million iPhones in 2012.

In addition to the growth from smartphones, Apple also enjoys the top perch in the tablet market—a segment that may also overtake PCs soon.

Now below $550, the shares are insanely cheap. The stock has a P/E ratio of 11 times 2013 EPS of $50.13 and 9.5 times $58.70, which is the projected EPS for 2014.

Moreover, Apple stock yields 1.8%, making it a perfect fit for our portfolio, which concentrates on dividend and technology companies.

We can't know for sure if the drop below $550 will represent "the" bottom, but we can't pass on this opportunity to buy America's favorite (and perhaps best run) company at such a discount either.

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