After 4.5 years, I finally closed my Apple position last week.
I started buying in early 2013 in the low $60s (accounting for the 7 for 1 split). In 2016, I added to the position in the low-mid $90s. For quite some time it was my largest or second-largest position.
No matter how conservative I got, I couldn’t come up with a value below $120. Last fall, I wrote:
The narrative is either “its going gangbusters” or “its going down the toilet”. Right now, we seem to be closer to the latter.
The narrative shifted over the past year, as Apple racked up an impressive 80% run.
As usual, I began selling way too early ($120), and finally exited my last sliver on November 10 at $175. Overall, my cost basis was $71, and my average exit price was $130 and change.
Counting dividends, Apple returned between 18-20% CAGR. Not spectacular, but considering the size of the position, and its relative safety (in my opinion), it is my kind of long-term trade.
At current prices of $175/share, AAPL doesn’t seem to be as great a value.
Last year, Apple earned about $9/share. It has about $31/share of excess cash. Using a conservative 12x multiple on the earnings, and a 20% repatriation haircut on the excess cash, I get a valuation of about $135. If you use a 15x earnings multiple, you can justify paying up $160.
I don’t know what the right multiple is. I hesitate using a high multiple because (i) Apple relies heavily on the iPhone, which regardless of how the winds are blowing currently is subject to disruption/erosion, and (ii) earnings are starting to saturate/grow more slowly.
I don’t think AAPL is grossly overvalued. However, I prefer to sit this one out.
Apple might quite possibly march onward to become the first trillion dollar company. I’ll be happy to watch the fireworks, and cheer on from the sidelines.