The Fall of Apple?

As George Harrison told us, "All Things Must Pass".  This is true for rock bands and I suppose stocks as well.  AAPL lost some of it's sheen yesterday when it was announced they are cutting back on Iphone production (Apple shares fall on reports of cuts to iPhone parts orders).  While I try to keep a pretty good spread of stocks, Apple is my 2nd largest holding at 6.5% of my portfolio, sandwiched between GNW and CSCO (they are all roughly the same).

I have every intent on holding my shares.  I may even add shares, though my risk management approach is not to let a single security get too large.  The reason I think Apple is still a buy, even though the hyper-growth story may be over, is that Apple was never that expensive. If you look at my top 200 list from yesterday, it has an earnings yield of 12%.

Here are the earning yields of some other "growth" stocks:

GMCR: 8.7%
HD: 7.2%
ADBE: 6.7%
GOOG: 6.5%
MA: 6.2%
AMZN: 0.6%
CMG: 5.5%

Of the 600 stocks in my database with market caps > 5b, I have Aapl as the 75th cheapest.
So by measure of earnings yield, Apple is a pretty inexpensive stock.  The question you have to ask, is whether their growth is dead? Are they a RIMM or an HPQ? I'd argue no!  I think Apple still sits in the proverbial catbird seat.

They have an incredibly sticky product.  Once you buy in (and a lot of people have), you then are buying aps, music, tv shows, movies etc.  Apple touches so many people and has a pathway to their wallet.  People would kill for that. people would give away their product to get that.  I do not know what they will use that for, but that pipeline to the wallet through ITunes, will enable Apple to sell many other things.

Apple has cutting edge products (phone and tablet) in two of the fastest growing markets in the world.  Do they still have the edge they had 4 years ago?  No.  Competition has caught up. But to say they will not continue to grow, seems unlikely.  The world is a big place. There are still a lot of people without smartphones. I think AAPL continues to grow profitably. 

Most people know Apple also has a tremendous amount of cash.  No one really knows what they will do with that cash, but it can be used as a lever to improve the stock price (dividends, buy backs or accretive purchases).

Yesterday was a very flat day for my portfolio.  You can see from chart below, that Apple is a laggard:

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
AAPL	150	527.94	501.75	-	-5.0%	3.8%	-8.7%
BHK	2,259	12.78	15.24	2,861	29.2%	9.1%	20.1%
CIM	15,000	2.67	2.73	-	2.2%	0.5%	1.7%
CSCO	4,292	17.22	20.97	2,014	24.5%	10.6%	13.9%
CSQ	5,482	8.28	10.25	5,620	36.3%	26.0%	10.3%
FCX	1,110	32.19	34.72	344	8.8%	4.3%	4.5%
FSC	2,829	9.81	10.67	2,330	17.1%	8.3%	8.8%
HFC	1,217	35.02	45.82	2,586	36.9%	6.8%	30.1%
INTC	1,974	20.99	22.00	1,998	9.6%	19.6%	-10.0%
JPM	1,684	35.29	45.88	1,494	32.5%	10.5%	22.1%
JQC	4,221	9.12	9.96	4,945	22.1%	9.9%	12.2%
KMF	1,872	22.10	31.39	4,454	52.8%	22.2%	30.6%
MPC	582	43.98	62.62	546	44.5%	8.1%	36.4%
O	558	19.41	43.22	7,463	191.5%	73.1%	118.4%
OIBAX	3,948	4.94	6.61	6,821	68.7%	73.1%	-4.4%
PGR	2,092	20.54	22.55	2,000	14.5%	8.8%	5.7%
PRE	536	67.43	83.44	1,286	27.3%	9.0%	18.3%
PVD	427	65.11	111.20	3,788	84.4%	22.5%	61.9%
SAI	4,727	12.83	12.08	1,938	-2.6%	4.4%	-7.0%
SLCA	2,062	14.34	18.85	1,000	34.9%	2.3%	32.6%
STO	1,040	23.82	25.72	1,121	12.5%	24.9%	-12.4%
VIVHY	2,296	16.70	22.05	3,749	41.8%	7.5%	34.3%
Total Open				58,358	25.6%	12.6%	13.0%
Closed					10.8%	9.3%	1.5%
Combined					15.0%	10.2%	4.8%
IRR Since 12/31/10					16.6%
2013 Gain					3.7%