We suggest that you look at Apple (NASDAQ:) if you have cash on the sidelines, waiting for the right opportunity.
Amid this year’s market rout, the Cupertino, California-based iPhone maker fell 10.2%, far less than peer tech mega caps in the FAANG group. AAPL shares ended Monday at $159.30
The world’s largest company by market capitalization has many characteristics that make it an outstanding defensive play during times of crisis. Apple, with more than $200B in cash, is in an enviable position to increase its share-repurchase program, further supporting its long-term valuation. Moreover, the positive outlook of Apple’s last displays its resilience in the current high inflationary environment.
Just how long this general sell-off in technology stocks continues is anybody’s guess. Even if the bearish spell continues, there are strong reasons to believe that Apple shares will outperform.
Safe Haven Play
Many investors believe Apple is a high-growth technology company that they should avoid when trouble strikes. Apple, in our opinion, is more of a company that makes consumer goods, which can be a safety net amid the turmoil in technology stocks.
With 1.8 billion Apple devices in customers’ hands—including computers, tablets, as well as its iconic smartphone—the company has a wide economic moat and financial muscles to survive economic shocks and generate consistent growth. Despite continuing chip shortages that affected many tech companies throughout the year, the tech giant remained positive and benefited from a flood in new products including the iPhone 13, Apple Watch Series 7, updated Macs, and the iPhone 13.
This stickiness of Apple’s ecosystem is the main reason that Warren Buffett, the world’s most successful value investor, has held on to his stake in the company since 2016, making AAPL the biggest holding in its portfolio.
Buffett’s investment firm, Berkshire Hathaway (NYSE:), had amassed more than a 5% stake in Apple by mid-2018 with a valuation of $36 billion. This stake’s current market value is more than $140 million.
Capital Return
The impressive run that Apple’s stock delivered over the past decade reflects the power of Apple’s capital return program. Apple has been the largest buyer of its own shares in the history of the company. Apple spent $85.5 billion to buy shares and $14.5 million on dividends in its fiscal 2021 that ended in September.
Apple is a mega-cap stock that has been favored by many because of its strong capital-return program and consistent sales growth. An Investing.com survey of 44 analysts, 37 rate Apple “outperform” with a 12-month price target that implies about 21% upside potential.
Source: Investing.com
Analysts also point to the company’s high-growth opportunities. These include its potential venture in autonomous vehicles and its planned foray to the metaverse via virtual reality and augmented reality products.
Bottom Line
If you intend to keep your position for the long-term, buying Apple stock during this bearish period is a good strategy. Apple’s vast consumer appeal, its robust share buyback plan, and future growth opportunities are among the factors that will help its stock rebound quickly once this bearish spell is over.
