U.S. stocks continue to print higher record highs. Yet one of the most widely held stocks in the world,
William Meade, my colleague at billionairesportfolio.com, has been an outspoken analyst on Apple. He has followed Apple closely since its revival in the early 2000s, when the large hedge fund he worked for as an analyst owned Apple shares under $10.
Meade was very bearish on Apple in late February of this year, an unpopular view. Apple went on to drop 25% in the following two months. He then flipped the switch a month later and said the bottom was in. Apple shares were trading $433.
Meanwhile, at the beginning of this year, many analysts, including the high profile technician Tom Demark were banging the drum, calling the bottom in Apple. For Demark’s public call, Apple shares were trading $498 at the time. He was off by three months and about $110 bucks.
Now Apple shares trade back above $500 and despite the persistent strength in the broad stock market, investors seem to lack similar exuberance for one of the leading brands in the world. Of course, Apple leadership has changed, and it’s highly anticipated product roll-out reportedly failed to impress investors. So for the first time in a long time, there is growing scrutiny surrounding the future for the company and the outlook of its stock.
Contrary to that scrutiny, Meade has become quite bullish on the stock and below are ten reasons why he thinks Apple will reach $700 in 2014.
1) “Apple is cheap relative to its historical valuation. Apple’s average 10 year P/E ratio is 17.5 times earnings. At 17.5 times earnings this would put the stock around $700 a share.
2) Technically, Apple just completed a major trend break on a weekly chart which projects a price target for Apple of $680 to $700.
3) Apple has a higher dividend (2.27%) than both the S&P 500 Index (1.93%) and Dow Jones Industrial Average (2.25%). Therefore Apple is not only a value stock but also an income stock as well.
4) The world’s greatest investor and activist, Carl Icahn owns 3.9 million shares of Apple, and will continue to push the company to create shareholder value by forcing Apple to buy more of its stock back or pay out a special dividend.
5) According to Research firm Bernstein: Value based mutual funds have been buying Apple at a record pace. Now 36% of value based mutual funds with assets over a $1 billion have a position in Apple. That’s a 40% increase from a year ago.
6) Wall Street loves Apple as well. Of the analysts that cover Apple, 72% have a strong buy on the stock.
7) 75% of Wall Street analysts are projecting Apple to beat earnings expectations in December. That tends to kick-start momentum in a stock.
8) Apple is significantly cheaper than the S&P 500 Index. Apple sells for 13 times trailing earnings and 10.9 times next year’s earnings. The S&P 500 trades at 18.7 times trailing earnings and 15.9 times next year’s earnings.
9) Apple is the most loved stock by the “smart money.” According to
10) Apple represents more than 12% of the Nasdaq 100, yet is lagging the Nasdaq 100 by more than 28% year-to-date. Expect hedge funds to buy Apple and sell the Nasdaq 100 Index in search for this gap to close.”
