Apple Inc. (AAPL) is the perfect contrarian stock buy right now.
Earlier this month it traded down for eight days straight. It hasn’t done that in 18 years.
This is what happens when you follow the herd.
You see, it has been known for at least a quarter or two that AAPL was going to have report less-than-inspiring first-quarter numbers because it also has been known for quite some time that the massive boom in iPhone 6 sales was not going to continue.
Revenue, earnings and margins all came in lower than expectations. And with 67% of its revenue coming from outside the U.S., a stagnant global economy means there’s not much optimism now.
But analysts knew this. The current 17% selloff since its April highs seems like these experts were caught off guard by something. But they weren’t.
So What Happened to AAPL Stock?
The herd rolled in and loved AAPL stock as it rose, knowing full well that sales growth would mature and slow. It knew that China was having a tough time and that would hurt because the dollar is strong and sales would slow. But everyone kept saying AAPL was the greatest buy in the market.
But when AAPL pinched everyone in late April, the market reacted swiftly and harshly.
In my opinion, too harshly.
For me, the stock has been too expensive for a while now, and this is a great buying opportunity for AAPL stock. I’m a contrarian, which basically means when the herd runs away from something, I explore whether it’s time to run toward it. And in AAPL’s case, this is a great time to buy.
Here are a few very important points that the ‘experts’ have overlooked:
There’s a significant conversion rate of Chinese Android users to Apple products. Conversions were up 40% September through March, compared to the same period a year ago.
The new iPhone 5se has launched. This could be a game changer down market. This is essentially an iPhone 5 with the guts of an iPhone 6. It’s lower priced than even the original iPhone 5s, which makes the phone a good choice for price-sensitive buyers. That lower price point also will help boost Android conversions.
The current economic trend in China isn’t as bad as the experts have made it out to be. Sales in China dropped 11%, but if you account for the weakening Chinese yuan, sales only dropped 7%. At this point, the yuan isn’t falling and the U.S. dollar is a bit softer than it has been. Both are good for Chinese sales.
AAPL still pulled down $58 billion in revenue from China in 2015, more than any other foreign company. That is a very good sign that it is still strong in this market.
Apple is also committing to grow its market share in India this year and beyond. There is an enormous youth market there and the latest LTE coverage by carriers will be an inflection point in mobile service in India.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.
