Apple Becoming A Good Speculation

| About: Apple Inc. (AAPL)

To many Seeking Alpha readers, it must seem like Apple (NASDAQ:AAPL) has always been a market dog.

But the fall from grace is still only 10-months old. The collapse from $700/share to below $400 was steep, relatively sudden, and left a lot of investor bitterness in its wake.

Still, now may be the time to speculate again. Do it with clearer eyes now, with an eye toward getting out when all your friends decide they're bulls, too. But do it.

First, the company is practically paying you to own this stock. A $60 billion stock buy-back program has already cut the number of shares outstanding from about 940 million to fewer than 910 million. You're also getting a flow of dividends that yield 2.73%, dividends that barely make a dent in the company's quarterly income. Tying CEO Tim Cook's own pay package to the performance of the stock also means he's in there with you, with a real incentive to make you money on your investment.

Second, Apple knows what its problem is, and is moving to address it. The problem, which began with phablets, is that as a market is penetrated you want to have value pricing, not premium pricing. Samsung offered that, and Apple will too, once its Apple 5C, a low-priced iPhone in a plastic case, starts rolling into stores of all kinds, in all places. Note that the 5C is expected to do most of its business in the developing world, in places like India, and Africa, where smartphone penetration has yet to peak.

Third, no company knows more about monetizing its customers than Apple. This is currently being discounted by investors, but content revenue streams grow over time, and they're wildly profitable. The company currently sells $16 billion in purely digital products each year - software, music, videos - and margins on that business are extraordinary, because unlike with Netflix (NASDAQ:NFLX) the company isn't seeing "clearance" to give this content to consumers, it is just re-selling it.

Want to see risks? You can believe it won't ever figure out the iCloud, but I doubt that. You can claim it will never be able to get back share in tablets, but it has been increasing its share in phones. There are all sorts of reasons to fear for the future of Apple, but that's good - it means it's game on.

And when you're paying just 11 times earnings, getting a positive yield, and are just about to see stuff that many in the media will doubtless call insanely great, it's a good time to go long.

Remember, your basis in a company whose shares you buy today is today's price, not the price 10 months ago. Apple remains the best bargain on the board.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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