No it is not because Steve Jobs appears to be healthy and fully involved with Apple (AAPL). No it is not because Apple is releasing iCloud on Monday at WWDC. No it is not because the iPhone is the hottest cell phone this side of the Moto Razor (MMI).
The number one reason why you need exposure to Apple in your portfolio is because it is poised for "super mainstream" adoption in enterprise and the government. Michael Rosenwald wrote an article in the Washington Post on Monday which provided a wealth of examples and statistics regarding public sector use of the iPad and iPhone.
Some of the highlights from the article include:
- Agilex Technologies (Apple product integrator) has seen "extraordinary demand."
- 35% of U.S. workers either buy their own smartphone for work or use unsanctioned Web sites/applications.
- Pacific Northwest National Laboratory witnessed a 30% decline in Blackberry usage when employees were given the choice to use other smartphones.
- Alcohol, Tobacco, and Firearms plans to double its iPad purchases.
- Department of Veterans Affairs will let clinicians choose an iPad/iPhone instead of a BlackBerry.
There are numerous reasons cited as to why iOS adoption is logical for the enterprise:
- Increased productivity and worker enjoyment.
- Reduced technological training.
- Overall cost reductions.
The gears of the federal government are slowing moving towards adopting iOS devices over Wintel (INTC) devices. Even our neighbors to the north are purchasing iPads rather than buying Canadian-designed Blackberry Playbooks (RIMM). While Apple desktops and laptops are still generally more expensive than comparable Microsoft (MSFT) Windows computers, both the iPad and iPhone are competitively priced with rival tablets and smartphones. Everyone knows the iPhone story and that alone should have you convinced that Apple is undervalued but when you consider the possibility that Apple can sustain its "supergrowth" (i.e. high double-digits growth rate) you have a bargain on your hands. I am not an advocate of "hot stocks" and am generally a contrarian but sometimes a company's story is too hard to pass up. As an aside, I am still surprised that people recommend selling Apple to buy LinkedIn (LNKD) when there is such a mammoth discrepancy in the two companies' earnings.
The "halo effect" has been written about before but I believe we are at tipping point now: the adaption of the iPad is too swift for enterprise and the government to ignore. Wealthy opinion leaders will not use their iPhone and iPad on their commute and then accept a lower quality product at work. The "rank-and-file" will continue to clamor to use their personal devices at work and IT departments will ultimately oblige.
The picture is not completely rosy for Apple as there are always lingering concerns; however, I believe that they are all more than priced into the stock. I am not telling you to go out and overweight Apple in your portfolio but with retirement becoming an unattainable dream for so many Americans I believe it would be a disservice to not own some Apple. You may already own a decent amount of Apple without having ever directly purchased the stock! For example, Apple is one of the largest components in the three major market indices, thus you would not have to go out and purchase additional Apple. Remember that this is a volatile stock (1.4β) that can swing like the lead in a Dallas Mavericks game, so you need to have internal fortitude to invest in Apple but I believe that the long-term rewards are well worth it.
Lastly, if the number one reason to own Apple is not compelling enough (capital gains), I present another: weekly income. This is the basis why I can recommend Apple to virtually all investors with minimal hesitation. You can sell covered calls and cash secured puts on a weekly basis to generate cash and drive down your coat basis. You do not have to be one of those lucky investors who bought Apple before 2009 to have a cost basis under $300 with prudent option usage.
In closing you may be wondering why I am urging you to buy Apple now when I've been bullish on the stock for years. I believe that investors have been given a gift in the form of a flat stock price for Apple since it last reported its blockbuster earnings. I've seen companies beat earnings by far less and rise double digits. Sure, Apple sandbags its earnings estimates every quarter but it even beats the whisper number consistently. For further elaboration, please consult some of the great articles written by Andy Zaky who chronicles his expected Apple's earnings beat next quarter. With a new iPhone season and back to school on the horizon, I recommend that you put some Apple into your portfolio.
Disclosure: Author is long AAPL and short AAPL June 3 350 Calls.