At first thought, buying shares of Apple Inc (NASDAQ: AAPL) might seem like a no-brainer. After all, Apple is one of the most famous companies in the world.
The iPhone is almost as ubiquitous as Coca-Cola and the Big Mac. Apple’s decades of innovative marketing and powerful brand building have led it to become the largest company in the world by market capitalisation. As it currently stands, Apple has an eye-watering valuation of US$2.98 trillion.
However, there is something to consider for all would-be Apple investors today, that might make some potential buyers nervous.
Just last night on the US markets (our time), Apple shares hit a new all-time high of $190.07 each.
Many investors don’t like to buy any company when it’s sitting at an all-time high. Especially when the said company has already appreciated more than 50% over just the past six months alone – no mean feat for a near-US$3 trillion stock.
So are investors really crazy to buy Apple shares at their current level?
Are Apple shares still a buy at an all-time high?
One ASX investor who thinks Apple is not a buy, but a sell, is Wilson Asset Management’s WAM Global Ltd (ASX: WGB). Speaking at a recent Buy Hold Sell Analyst Forum, WAM Global investment analyst William Liu told investors that Apple has run too high. Here’s some of what he had to say:
Apple is a sell. So undeniably, Apple’s one of the world’s biggest, best companies. They have a great product, great brand and loyal customer base. But at the same time, we don’t believe Apple is immune from a consumer slowdown, and so the market perception is that it’s trading at 29 times price-to-earnings, it is over a 50% premium to the S&P 500.
That’s in contrary to some of our recent channel checks, which suggest that iPhone sales, Mac sales are slowing, so at the end of the day it is still a consumer discretionary business, and at 29 times, it’s much too expensive for us, and we see better opportunities elsewhere.
So that’s pretty emphatic.
But let’s look at a counter-opinion. One of Apple’s most famous shareholders is Warren Buffett. Buffett owns a huge chunk of Apple stock, which makes up his largest position by far at Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) at roughly 47% of the company’s share portfolio.
When asked if Berkshire’s stake in Apple was too high at the recent 2023 Berkshire Hathaway annual meeting, here’s what Buffett had to say:
Apple… just happens to be a better business than any we own.
And we put a fair amount of money in it, but we haven’t got more money in it than we’ve got in the railroad. And Apple is a better business. Our railroad is a very good business. But it’s not remotely as good as Apple’s business. Apple, you know, has a position with consumers where they’re paying, you know, maybe the $1,500 bucks or whatever it may be for a phone.
And these same people pay $35,000 for having a second car. And if they had to give up a second car or give up their iPhone, they’d give up their second car. I mean, it’s an extraordinary product. We don’t have anything like that that we own 100% of.
But we’re very, very, very happy to have 5.6%, or whatever it may be, and we’re delighted every tenth of a percent that goes up [through share buybacks]. That’s like adding $100 million to our share of the earnings. And they use the earnings to buy out our partners, which we’re glad to see them sell out, too.
So there you have it, two opposing opinions on Apple stock.
It’s worth pointing out that Warren Buffett has a far better track record of investing than WAM Global does.
Berkshire Class A stock is up more than 25% over the past 12 months, while WAM Global stock has lost investors more than 15% since the listed investment company IPOed back in 2018. Including dividend returns, investors have enjoyed an average annual gain of approximately 1.5% since the IPO.
