Should you by Apple Stock Now?


AAPL Stock 1
Figure 1:  Apple Stock on Split Adjusted Basis

Had you purchased Apple Stock on 09/10/2001 – just one day before Al-Qaeda attacked the World Trade Center and the Pentagon – you would have paid only $1.25 per share had you bought at that day’s high (this assumes a split adjusted price tag on the stock).

Had you invested $1,000 into the stock back then (just 18 years ago) you would have purchased 800 shares at that split adjusted price.  Those shares today at $220.16 per share would be worth $176,128.  That is a return over 18 years of 17,613%.  On an annualized basis that would be a return of 33.28% per year (compounded annually).  Not a shabby return.

In 1976 the first Apple computer was brought to market by Steve Jobs and Steve Wozniak. You can see what this looked like below:

AAPL Stock 2
Figure 2: First Apple Computer Released to Public

On December 12, 1980 Apple launched it’s Initial Public Offering (IPO) at $22.00 per share. The stock has split four times since the IPO so on a split-adjusted basis the IPO share price was $0.39.  The rest is history and you can read a complete history of this great company by clicking right here.

Had you invested $10,000 at the IPO of this stock you would have purchased a split adjusted 25,641 shares that today would be worth $5,645,122.56 — Wow!  That’s only 17.64% per year compounded annually … but still not shabby considering the lean early years from 1980 to 2004 or 2005.  This only goes to prove patience pays in stock market investments.

Since that funny looking computer pictured in Figure 2 above Apple has come out with the following:

  • October 2001 – the iPod for those who wanted to download and listen to music on something they could carry in a pocket or purse.
  • March 2007 – the Apple TV.  Oh yea … it’s older than most people think.
  • June 2007 – the iPhone – still the hottest selling smart phone on the global market.
  • April 2010 – the iPad – a smaller version of a computer that all people are now using some version of (including doctors offices and hospitals for patient records).
  • April 2015 – the iWatch – for those who have good eyesight and look for smaller computers to wear.

So why would I ask in my title “Should you buy Apple Stock now?”

A BRILLIANT MOVE JUST MADE …

Before I get into this brilliant move that Apple just made … let me first explain 5G.  Wait rather than me explaining it in the dumb way I would … just check out this You Tube Video that does a much better job than I could.  In this video it says that 5G will be available in 5 years and should be 10 times faster than 4G which most of us have some version of now (usually 4G Lite).  Since this video was made, some experts have decreased the time for 5G rollout to begin as early as next year in major metropolitan areas and be completely rolled out nationwide in as little as three years.  In addition they are now saying 5G will be 100 times faster than 4G. 

In order for 5G speeds to work on your device (be it a computer, cell phone, a watch or TV) the device must be set up for 5G.  Android, Google, Blackberry and other cellular and Internet of Things manufacturers are making sure that anything offered this year going forward is 5G compatible.  I have a Google Pixel Phone that is about 2 years old.  If I were to upgrade to the Google Pixel 3 it would be 5G compatible even though we do not have 5G yet.

Now here is the brilliant move Apple made two days ago.  They just announced the iPhone 11 along with new iPads, iPods, Watches and a new 2019 Apple TV.  Not one of these items are now 5G compatible.  You can read about these here.  There are some solid business reasons why Apple has not made these products 5G compatible that is explained in this PC Magazine Article.  However, the key is that it has opened an opportunity for you – the investor.

Now normally I would not recommend a person to jump into a stock that has gone up so high in recent years unless you could get a pull back like we saw between October 2018 and January 2019 (shown in the graphic below).

AAPL Stock 3
Figure 3:  Apple Stock over the past one year

Here we see the stock fell from a high of $233.47 to an annual low of $142.00 per share – a nice decrease of 39% from the all time high.

But things are different, I believe.  Apple has some very loyal customers.  People who would not own a device by any other maker.  When 5G does hit – and I think it will be sooner than later – there are a lot of people that will be getting rid of their new 2019, 2018 and 2017 versions of Apple products to purchase the new and improved 5G product Apple produces.  Getting rid of these older products will not cost Apple a dime – yet they stand to make tons of new money on the new products.  Remember: other companies already have 5G compatible products so they don’t stand to make as much when Apple does.  Their earnings have to increase and along with earnings increase we get stock price increase.  Look at the ten year chart below which shows the price of the stock above in red and green candles and the earnings per share of stock below in a blue line.

AAPL Stock 4
Figure 4:  Price vs. Earnings per Share

Ten years go the earnings per share was $0.95 and the price was $26.43.  The price to earnings ratio (P/E Ratio) at that time stood at 27.8:1.  Today the price on this chart is $222.21 (up a couple of dollars since I started this article) and the earnings stand at $12.84 per share.  Now the P/E ratio is 17.3:1.  It stands to reason that if 10 years ago at a PE Ratio of 27.8:1 the stock was fairly valued … it is under-valued today at a PE Ratio of 17.3:1.

As a side benefit, if you are a buy and hold investor, this stock pays a dividend of $3.08 per share per year which is a dividend yield of 1.39% (and is better than you get in the bank with no growth opportunity).

OTHER COMPANIES WITH 5G MARKET POTENTIAL …

Other than Apple, are there some other companies that could make good money in the future 5G world.  I think so …

Here’s four that I have either invested in or am considering investing in:

  1. AT&T (T) – A nice trend up YTD with a dividend yield of 5.32% per year.
  2. Verizon (VZ) – Trending nicely over the past month with a dividend yield of 4.10% per year.
  3. Qualcom (QCOM) – A decent trend up over the past one year with a dividend yield of 3.14%.  Also leading in 5G chips at the present time.
  4. American Tower (AMT) – A very nice trend over the past one year and currently in a minor correction.  Could be a good time to enter the stock.  Dividend yield is 1.71% per year.  This is the largest Cell Tower owner and operator in North America and if it wasn’t for them there would probably fewer cell phones.  According to Barron’s … They have 40,000 towers in the U.S., 58,000 in Asia, 35,000 in Latin America and 15,000 in Europe, Middle east and Africa.

That’s it for today.  Good investing and let me know how it turns out for you.

Jerry Nix,   Freewavemaker, LLC

Disclaimer:

The information shared in this article is not meant as investment advice. Before acting on any of these investments referenced herein that was meant for education only, please check with a qualified professional like a financial planner or broker that you may be working with. These investments may not be right for you at this time.

The writer of this article owns investments in the following currently:  T, VZ, AAPL.

 

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