Apple Reinvented

Apple is by far the most important holding in our client base. The aggregate value of shares in custody in New York is over $57 million, across 809 accounts.

A few years back, Apple traded at a big discount to the overall market. We complained in a newsletter that it was "was priced like a Chinese steel mill". In other words, it was given no respect at all, and was afforded a very low price-to-earnings ratio of around 10 times.

At that point, the "smart money" said that Apple couldn't innovate anymore because Steve Jobs was dead. Some said it was running out of people rich enough to buy iPhones, and that the annual handset upgrades were trivial and people would stick with their old models.

Well, that was all garbage. As Robert Armstrong, US Financial Commentator for the FT (that's him in the picture below) pointed out recently, "Apple shares have pulled off an amazing trick. They outperformed the market like a tech stock when tech stocks were hot. Then, this year, as tech has fallen out of favour, they have slightly outperformed the broad market and crushed other tech stocks".

He continues: "The result of this is that Apple now trades at almost as big a premium to the market as it ever has. Apple's widening premium over time can be partly explained by the transformation of the business. In the most recent quarter, 25 percent of revenues came from services. In 2016 the figure was 14 percent. More importantly, Apple has proven that it can sell iPhone fans top-end models on the back of only incremental improvements - and expensive supplemental products, too".

We love the products, the services, the story and the stock. You can still buy more Apple shares now.