Exploring Apple Stocks Daily (AAPL) – Get a reportI stumbled upon a gem from Ark Invest CEO, CIO and Rockstar CFO Katie Wood. In January 2016, during an interview with CNBC, she was asked which stocks seemed more profitable at the time: AAPL or AMZN.
Given a 5% loss in Apple stock in 2015, she responded as follows:
“In this moment, […] Apple maybe because […] thinking there is so short. […] Apple is going to be a big company, and [the stock] was recently discouraged by a check of distribution channels: how will iPhone sales in the first or second quarter. “
Since this interview, Apple’s stock price has risen 400% in just five years.
Learn more from Apple Maven: What ARK Invest CEO Katie Wood thinks of Apple stock
# 1. Buying quality by weakness
The first important lesson Ms. Wood learned in 2016 above is that high-quality companies that are likely to rally up over time should buy weak positions. The logic is simple: if the long-term trend is up, buy stocks when the market sells them at a discount.
A couple of months ago, I appreciated this idea. Historically, it has made more sense to buy AAPL when stocks have fallen from a previous peak.
The chart below shows the historical average annualized returns on Apple stock under various scenarios. Please note: the more stocks fall, the higher their future returns will be.
Following the same logic, current Apple investors may be encouraged by the fact that the company’s stock will remain underwater: 12% below its peak of $ 143 in January 2021. If the AAPL makes new all-time highs soon, as I recently suggested, year-end yields may start to look attractive.
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No. 2. Filtering short-term noise
The second point made by Katie Wood is equally important. In her opinion, Apple shares were under pressure in 2015 and early 2016 due to short-term fears over smartphone sales in the next few quarters, especially after the release of the blockbuster iPhone 6.
When analyzing market movements, I find it helpful to think about the real factors that influence the price of a stock: the buyers and sellers of the stock. Sometimes people on both sides of the deal are more concerned with how stocks might perform in the near future, perhaps hoping to make money quickly – and that’s okay.
In such cases, long-term buyers are probably better off ignoring the “short-term buzz” about what sales or profits might look like right around the corner. Better yet, they may want to take advantage of the selling pressure created by short-term traders to take a position at better prices.
Apple may face a similar situation in 2021. The Wall Street chatter seems to revolve around the successful conclusion of the year of the pandemic and the release of the first 5G-enabled iPhone.
But look beyond the next 12 months and it might be easier to make an optimistic case for Apple stock. The company continues to grow revenue, increase margins, and accumulate cash, although it has yet to harness the power of mixed reality and autonomous vehicles.
Learn more from Apple Maven: Apple Stocks: Could It Be The Next Big Service Event?
Shares in big tech companies like Amazon and Apple are a tiny fraction of the famous investor Katie Wood’s ARK portfolio. In your opinion, which of the following FAAMG names deserves a higher stake in technology disruptive ETFs and innovation? Leave your vote below on Twitter with our partner @AmazonMaven.
Is the price right?
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(Disclaimer: This is not an investment advice. The author may be one or more of the companies mentioned in this report. The article may also contain affiliate links. These partnerships do not affect editorial content. Thanks for supporting Apple Maven)