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⇒ Trading Apple
Why are Apple’s shares considered an attractive investment?
They represent a stake in a phenomenally successful company. In terms of impact on the everyday lives of hundreds of millions of people, Apple’s founders and their successors stand alongside Henry Ford and Alexander Graham Bell. The company’s key products have entered the language, whether the Mac computer, the iPhone, the Apple Watch and, of course, iTunes, described as the world’s biggest juke-box. There was even a 2015 film about the company that took its name from co-founder Steve Jobs.
Follow Apple (NASDAQ: AAPL) publications and financial reports in their Investor Relations Page.
Good news for consumers, undoubtedly, and good news also for investors. Apple’s recent results, covering the three months to December 31 2016, saw the company’s chief financial officer Luca Maestri announce: ‘We returned nearly $15 billion to investors through share re-purchases and dividends during the quarter.’ The quarterly dividend itself was 57 cents a share, identical to the dividend for the previous three quarters and up on the 52 cents paid for each of the four quarters before that.
Business is brisk at Apple. On January 31, Tim Cook, Apple’s chief executive, said of the last three months of 2016: ‘We’re thrilled to report that our holiday quarter results generated Apple’s highest quarterly revenue ever, and broke multiple records along the way. We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch.’
Who should include Apple in their portfolio?
- Those seeking exposure to the Dow Jones Industrial Average, the elite Wall Street index that contains just 30 stocks, representing the cream of publicly-listed US companies. Apple’s in there, along with Boeing, ExxonMobil and IBM.
- People looking to invest in technology and innovation. Apple’s output of bright ideas shows little sign of slowing down, and its new product launches have a spellbinding effect on investors and the tech industry.
- Day traders, hoping to profit from short-term movements in Apple’s share price. Contracts for difference (CFDs) are good way to do this.
How has Apple’s share price performed recently?
In the past five years, the shares traded between a low of $55.79 and a high of more than $135.62.
Aside from the powerful brand and the household-name products, what are the positive factors behind Apple shares?
- Its juicy profit margins, estimated at well over 30 per cent.
- Apple’s balance sheet, which is impressively strong by any standards and especially so when compared with some in the technology sector.
- The market that is served by Apple is far from saturated. Emerging giants such as China and India should provide the tech-hungry consumers who will power demand for Apple’s best-known products.
- While such demand may level off in the developed world, Apple is shifting the focus here to its Services businesses such as the phone-based payments system Apple Pay and the storage and computing service iCloud.
- Apple is focused on looking after its shareholders – again, in contrast to many in the sector – with a commitment to a progressive policy on shareholder returns.
What are the negative factors that may affect Apple’s share price?
- China is becoming a highly competitive market for the sort of products offered by Apple and there is no guarantee that Apple will come out on top.
- In India, the authorities have frustrated Apple’s attempts to sell lower-cost reconditioned phones to the public.
- Sales of iPhones and iPads have been softening and the major innovation of recent years, the Apple Watch, has not been universally admired.
- The uncertain attitude of the new administration in Washington to technology giants such as Apple, Google and Microsoft is another potentially negative factor.
- Apple may be looking after shareholders now. It didn’t always. Apple’s initial public offering was in 1980. It paid its first dividend in 1987 and continued doing so until ceasing in 1995. Payments were only resumed as recently as 2012. Shareholders will hope history doesn’t repeat itself.
The basics of investing in Apple
For the investor, there are two ways to put their money on Apple’s continued success.
- Quite simply, you can buy Apple shares. The company is listed on NASDAQ, the US exchange associated for many years with fast-growing technology stocks, but you can buy shares through a broker or financial institution from pretty much anywhere in the world.
- Rather than buy the actual shares, you can enter a contract for difference (CFD). You and a broker agree to pay each other the difference between the price of an asset – in this case, Apple shares – on the day the contract is signed and the price at which it stands when you decide to close the trade. If Apple shares have risen, the value of your CFD has risen by the same amount. The same is true if they have fallen.
Our CFD example assumes you want to bet on Apple’s shares heading higher. But if you take a downbeat view of Apple’s prospects, for whatever reason, there is nothing to stop you entering a CFD that pays out when the share price falls. All these investment routes are available through eToro.
Are Apple shares right for you?
Apple is a dominant company in its sector, one whose name is synonymous with elegant consumer-electronics products and highly-desirable services. Its share price is strong and it is returning plenty of cash to shareholders.
However, competition is intensifying in a fast-moving market in which today’s giants can tomorrow find themselves on the wrong side of events.
Ultimately, the question is whether Apple is going ‘ex growth’ or whether the best, in terms of innovation and profitability, is yet to be.