It’s the most widely-owned stock in the world. It has the largest market capitalization at $823 billion dollars, and is currently the leader in the race to be the world’s first $1 trillion company. And if that isn’t enough, it is sitting on a staggering $261.5 billion dollars in cash! I saw many attempts to put that into perspective, from it being larger than the market capitalization of most companies to it being more cash than at least 100 countries have to it being enough to buy every NFL, NBA, NHL and Major League Baseball team.
I’m talking about Apple (AAPL), of course, a truly NexGen company that has changed our world and made fortunes for investors along the way. I’ve made a lot of money on the company myself, going back to the first time I bought it nearly 10 years ago now. I remember well that I bought it after hours (which I don’t recommend) on rumors that Steve Jobs was ill. It was not true at the time, but he sadly passed away just a few years later after battling cancer.
It’s a testament to the company Jobs founded that it remains the juggernaut it is, and AAPL just set new all-time highs today after jumping more than 5% following earnings last night.
But the question that everybody wants to know the answer to is this: Is AAPL a good investment right now? For our purposes, the question is whether AAPL can deliver us the same kinds of returns we can get in other NexGen companies. So let’s break it down and talk about that.
Is There Any NexGen Left in Apple?
Let’s start with the most recent earnings. From top to bottom, the numbers were strong. iPad sales were up 15%, which is solid, but everyone wanted to know about iPhone sales. They were up slightly, from 40.4 million a year ago to 41 million this year. That’s just a 1.5% increase, but it’s actually impressive because everyone is waiting for the iPhone 8, which is expected to be released in the fall.
Expectations are high for the new iPhone for a few reasons. First, 2017 is the 10th anniversary of the iPhone, so you know the company wants to make a big splash with its new version. And second, the last few iPhone models have had nice improvements and upgrades, but they lacked the WOW factor. They didn’t have the breakthrough innovations that make everyone want to upgrade whether they need to or not.
As always, there are a lot of rumors about features on the new iPhone. Some of the coolest ones include:
- A better screen that will be curved and go from edge to edge (no black border).
- A better display that will use a newer technology referred to as OLED, or organic light emitting diode.
- Possible facial recognition capabilities, so your phone would simply recognize your face and unlock for you rather than need your passcode or fingerprint.
- Wireless charging. Sign me up for this one. A few phones already have this, including some from Apple’s biggest competitor, Samsung. This idea has been around but hasn’t been easy to perfect, so Apple has a chance to take a big step forward.
- Augmented Reality (AR) features, including the ability to change photos.
I’ve written to you before that AR has the potential to be a huge NexGen mega-trend (read the article here). It blends the real world with the digital world in amazing ways, and it could provide big growth for Apple. CEO Tim Cook was clearly excited about it. Apple’s ARKit will enable a bunch of new apps that employ the technology, and Cook has said that with hundreds of millions of people actively using the iPhone and iPad today, the iOS operating system will become the world’s biggest augmented reality platform as soon as iOS 11 ships.
Longer-term, AR’s close cousin, Virtual Reality (VR), will also be another driver for Apple. Both are clear examples of how the company continues to transform itself with the NexGen applications. Apple is also working on self-driving cars and artificial intelligence (AI). Apple spent nearly $3 billion on research and development (R&D) last quarter, and these are the areas where they expect it to pay off.
Don’t discount the iWatch either, as it could be moving closer to a health device. The applications go beyond fitness tracking. For example, Apple is working on incorporating sensors that will be able to monitor blood sugar, which would thrill diabetics and doctors the world over and immediate change the game when it comes to managing this disease that affects an estimated 30 million people in the U.S. alone.
And the Answer Is…
The bottom line is that Apple is the epitome of a NexGen company. It has been on the cutting edge for over a decade as a leader, not a follower, and now you could say it is back at the drawing board with the new iPhone, AR, VR, AI, vehicles, health, and more. I believe it never left the drawing board, which is one of the reasons for its unparalleled success.
However, I’m not a buyer, at least at these prices. I love the company and think the stock goes higher from here. I just see more upside potential in other NexGen stocks.
I’ve illustrated this by comparing stocks like AAPL to The Beatles. Sure, Paul and Ringo could sell out anywhere in the world if they went on tour and the group’s catalog will continue to earn income even when all four are long gone. But the big money has already been made in their music.
The same thing can be said about Apple (AAPL) as well as the “FANG” stocks – Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOGL). The odds these stocks moving higher are good, but the odds of them matching the huge gains made over the last few years are not.
We can make more money in companies that are not yet household names and have bigger upside potential. It’s not easy, but that’s where our multi-faceted NexGen method gives us an edge by incorporating fundamentals, technical analysis and intangibles – megatrends, CEOs, takeovers or anything else set to drive a stock higher.
Just looking at Apple’s report, we can already see areas to watch closely, including OLED display technology, wireless charging and augmented reality. Apple will do well incorporating this technology, but there is big money to be made in the smaller, nimble innovative companies developing the technology and manufacturing the components that will change our tomorrows. Wall Street isn’t looking there, but we are. It’s how we’re undefeated so far in NexGen Investor and NexGen Trader – seven for seven in closed trades with an average gain of 14.74% – and it’s how we’ll change our tomorrows as well.