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☕ Apple, what're youz gonna do about it?

Mar 05, 2024

Good morning! 👋

The markets have tipped red this morning as Apple leads tech stocks lower.

Why?

Super simple.

Apple is one of the most widely held stocks in the world, which means that as it goes, so go the markets. Computerization, passive investing, 0DTE options and Dark Pools make the downdraft more violent.

Not a big deal in the scheme of things.

An opportunity, actually.

Here’s my playbook.

1 – Oh-no ... there’s another report about Apple! 🤦‍♂️

Counterpoint Research – which does pretty darn good work btw - is out with a new report showing that – gasp – Apple's China iPhone sales dropped 24% in the first 6 weeks of the year. (Read)

Oh no... better cue up the ominous music, sell everything and run for the hills.

Seriously??!!

Time for some tough love.

Do you really think CEO Tim Cook doesn’t have a handle on this?

Apple:

Has shipped 2.3B+ iPhones since 2013
Has grossed more than $1.65T from iPhone sales over the past 10 years
Has 1B+ paying subscribers
Earns more than $3,000 a second and more than the median US household income every 30 seconds

**Data Sources: Apple, AltIndex, Statista

Apple got rich in China but will stay rich because of it as it moves into other areas like India, Vietnam, Malaysia, the Middle East, and the Philippines.

I know what I’ll be doing today.

You?

2 – Target = a double beat

The retailer reported a “double” - meaning it beat analyst expectations for earnings and revenue during the all-important holiday quarter. However, the company also said in the same breath that it expects weak sales again in 2024. (Read)

I’d rather own another retailer that has no such problems.

Keith’s Investing Tip: It doesn’t matter what you think, the point you want to focus on is which stores are getting the traffic and where customers are spending their money. As great as Target is, there are two choices doing better, one of which I recommend to the OBA Family.

Not to beat a dead horse here, but this kind of stuff matters if you’re serious about building wealth.

For instance, my choice has returned 64% over the past 12 months and the company’s 5 year CAGR (Compound Annual Growth Rate) is 30.51%. Target has turned in a respectable 19.47% over the past 12 months and has a CAGR of 20.05%, by comparison.

And just to close the loop if you’re an indexer – and lot of people are - the SPY has turned in 28.67% and has a CAGR of 14.73%.

Buy the best, ignore the rest.

3 – Could Ford’s C-suite schizophrenia be paying off?

I wonder.

Ford is reporting US sales jumped 10.5% last month and that the company has – get this – electric vehicles and hybrid models to thank for the spike. (Read)

Nearly 90% of the sales are traditional cars and trucks, which is to be expected. What catches my attention is an 81% jump in EV sales and a 32% increase in hybrid model sales.

Ford could be a force to reckon with if executives can ever develop a plan and stick with it.

4 – Tesla may be the toughest bet on the street right now

Analysts are falling all over themselves to proclaim the end of Tesla.

Demand for electric vehicles is falling says one, there's a price war on, says another, and its stock is down almost 25% for 2024 says a third.

Billionaire investors like Ron Baron aren’t fazed.

Me neither.

I prioritize companies making “must have” products and services with visionary CEOs who have a history of executing to plan and the capital strength needed to go the distance.

Tesla qualifies.

Like Baron, I will remain invested as long as my thesis remains intact.

Keith’s Investing Tip: Investing isn’t always easy, but it’s not rocket science either. You find great companies; you buy and you remain with ‘em through good times and bad. You keep your emotions outta the equation and exploit those who let theirs get in the way when you can... usually at times like the present when they sell off based on headlines or a biffed quarterly report. All as long as the original investment thesis remains.

5 – Hey Keith, just curious, I'd love to buy great AI stocks, but at the prices most are at I'd only be able to buy a few shares. Would it make sense to buy some long-term calls instead? - Thx, Brian B.

Howdy, Brian and thanks for asking.

Buying long-term calls could make sense, especially if you’re talking about LEAPS – Long Term Equity Anticipation Securities.

Generally speaking, the rule of thumb is to buy deep in the money (meaning below a stock’s current price) with a delta of 0.80 or more at the strike price you choose. The tradeoff, of course, is that the deeper in the money you go, the more expensive the option becomes.

There are several challenges, not the least of which is time decay. That's because every call option you purchase will lose value at an accelerating rate as expiration approaches. I have seen more than a few instances over the years where stocks shoot higher the day after expiration which doesn’t do the people who buy ‘em any good whatsoever.

Why not consider fractional shares instead?

They're a relatively recent development and have several advantages over LEAPs.

Fractional shares can:

Be more cost-effective for investors who want exposure to specific stocks but who may not have the capital to buy up full shares or who don’t want to pay the high premiums often associated with LEAPS.
Provide greater flexibility in terms of investment size – meaning that investors can allocate smaller amounts of capital across a broader range of stocks.
Make it easier for investors with limited funds to participate in the market because you can put your money to work sooner rather than waiting until you have a bigger war chest.

Make sense?