Apple Inc (AAPL)

(Market Call Minute.) Reaction to the new phones is fairly disappointing. The difficulty is what to do when you are the biggest company globally. Difficult to see them coming up with any more than incremental changes. If you own, take advantage of the rebound.

Apple (AAPL-Q) or Facebook (FB-Q)? He doesn’t like either one of these. Apple is a great company and has great products, but the stock has fallen so much that investors are selling Short. To drive the revenues higher, they have to come up with a fundamentally new product.

Pays a good dividend, which is sustainable because of the amount of cash that they hold. Product announcements are coming out currently and if you own, you could hold for a while. She has stepped out of the whole hardware device space because there is a lot of change going on and it is getting very competitive.

Not a fan of this company and he would rather be in the parts as opposed to the end company. Doesn’t want to be in the handset business and that is a big part of their business. This is not the “Steve Jobs Apple” and has shown this in the last 2 years. Hasn’t shown any innovation.

Valuation is ridiculously low in terms of a Price to Growth model. Even if you look at 10% growth, which is well below what they’ve generated in earnings growth historically, stock is trading at just over 12X this year’s earnings. If you strip out the cash it’s about 8X this year’s earnings. There has been renewed interest in the last few weeks. Company still has to produce good products which he thinks they do. The days of their innovation are not behind them.

Owned since 2006/7. He trimmed it 7 times. All of the issues of capital allocation policies, buy backs and refreshes of a phone are all incidental. The real future is in innovation, things we have yet to see. That is the thesis that puts him in Apple. They have a good dividend policy as well as aggressive stock buybacks. We have to see in the fall and in 2014 how they do with new products. Great stock for your portfolio.

If you own, you might want to take some profits. The smart phone market is getting pretty fully penetrated, especially the high-end where this company participates. Smart phones is a product cycle driven market.

Thinks this business is all about new product. There is a new iPhone coming out on Sept 10. Their new iPhone was similar to the one before that. When a tech stock starts paying dividends or buying back its own shares, it tells him that that is the best thing they can do with their money. If that’s the case, then the R&D pipeline is maybe kind of bogged down. He believes the stock will be higher 6 months from now and there will probably be more new products before December.

Way too high priced for him

He has a model price of $535 giving it a 15% upside. However, he thinks it’s going to have major resistance at $500. The balance sheet is growing very, very quickly.

(Worst call ever made.) He had a $423 Put Spread which expired last January. He had said that people that had this should stay with it because he didn’t think Apple would ever see $400 again.

Recommendation for a safe Canadian or US funded fixed income product in the technology field with a 2-3 year hold. Buy some of the Apple (AAPL-Q) bonds. Very safe credit. There is a 5-year and the 10 year that you could hold but he would buy the 10 year and hold it in the context of a portfolio. Has the best credit rating of any technology company other than Microsoft (MSFT-Q).

This has gone from the most loved company to probably the most hated. After cash is taken out it is trading at probably 7X earnings. Has a capital allocation policy that is new over the last few months. Right now they are paying about a 3% dividend. Committed to a $60 billion buyback which probably adds 2.5%-3% to shareholder return. Has a 15% free cash flow yield. The opportunity to the upside is that they come out with a product that catches on, in which case it will be a very successful re-emergence. The downside is that it becomes a little bit like Microsoft (MSFT-Q), a sort of utility like vehicle.

Badly in need of a catalyst. Share price is off almost 45% from the highs. With 10X earnings, a tremendous R&D capability behind it and the Eccosystem that is going to keep their existing customers there, now is the time to be Buying. Expect there will be a big move over the next 2-3 years.

Still buying this for new clients. He loves to buy stocks that are hated. At some point the dividend will be higher. Thinks the 2014 will be a better year for this company.