Investing in Apple

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apple2Many investors new and experienced are able to underpin the business dynamics of Google and Facebook. However, Apple is proving itself to be an enigma that investors just cannot understand. Whether it be laptops, mobile phones, music players and download services, desktops or the forthcoming smart watches, Apple has shown that whatever it focuses its attention on becomes a success, making headlines with every move they make.

A benefit of always being in the headlines is that investors are able to always find opportunities to invest with Apple, but there does come the risk of high volatility. Should any of their sectors have a bad quarterly report, disappointing launch sales or negative press, their stock could easily tumble at the same rate it rose.

Investors thus love to play stocks like Apples’ purely because they truly understand the big upside potential and have an appreciation for the high risk equals high rewards relationship. You are well advised to steer clear of Apple stocks if you have a lower risk tolerance. Often, many investors are afraid to trade Apple stocks because of their unease at the idea of trading options when in fact the same method can be used to hedge your bets and provide some safeguards in your trading activities, while at the same time enabling you to make the most of the volatility.

One of the ways investors may wish to utilise options is to implement a bull-put credit spread on the stocks they are interested in. How this is achieved is by selling a put that was out-the-money, while simultaneously purchasing additional deeper out-the-money puts. What will happen is that the puts that the put that is closer to the stock price will end up having a higher price, allowing your account to result in a net credit amount, which will essentially forecast your return targets. The only thing to hope for from then on is that the stock does not trade below the original sold strike at the time of expiration, at which point both stocks will expire and you end up keeping your initial credit!

Now is probably the best time to buy apple stocks since it has very recently split and is on the market for around £99.71, making it very accessible to many individual investors who normally would have originally balked at the £300 – £630 that it was priced at before the split. However, as discussed above, a strong stomach and high threshold of risk is needed. Despite Apple being very strong financially and amongst one of the most well known brands in the world, Apples’ stocks are very susceptible to strong movements within the market.

 

 

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Reasons To Invest

The Iphone Franchise:

In the most recent quarterly financial report, AAPL completely outperformed The City and Wall Streets expectations of the performance of the Iphone product ranges. There were 74 million units of the new Iphone 6 sold, the equivalent of 34,000 sold every quarter. It is believed that the great performance of the phones created a grand halo effect on the other Apple products, increasing interest in them, as is evidenced by the more than 500 billion visits worldwide to the Apple online stores. Examples of the Halo effect reach to the 14% increase in Mac sales while the rest of the PC market limped far behind.

Expansion into New Markets:

In order to keep up the growth, Apple has been targeting large segments, showing their intent by launching a variety of programs in the form of HealthKit, HomeKit and CarPlay. They are also aggressively pursuing and promoting the Apple Pay program by leveraging and creating business relationships with over 750 banks and credit unions in order to form a seamless payment system for consumers.

Reasons Not To Invest

The number completion for Apple is Xiaomi, which was founded only four years ago in China. They truly believe that their phones are on par with those manufactured and provided by Apple and thus provide better value because they are half the price. They are eagerly looking outside China for expansion and have already begun to lay foundations within India.

Product Cannibalisation:

The Ipad has experienced a 22% drop in sales within the last quarter, one reason being that the upgrade process for the Ipad is considerably longer than that for the Iphone. But the more imminent reason seems to be the cannibalisation of the Ipad by the larger Iphone or Macbook since consumers view them as more viable options. This also replicates in relation to the Iphone 6 with the Iphone 6+ and the Macs with the Macbooks, as many consumers switch around and experiment with the different products.

Final Word on Apple Stocks

Apple maintains that their primary goal is not the value of their stock prices, but rather it is to create the greatest products on earth that will enhance the lives of others, and many believed they are currently on course to achieve this goal.

In the end, regarding their stocks, and apart from the high volatility, it is quite difficult to find anything fundamentally wrong with the Apple stocks. They are a recognisable brand with a worldwide following and have a powerful global ecosystem that does not look like collapsing anytime soon. One highly attractive that convinces many investors to go with Apple is the £140 Billion of ready cash they have in the bank, allowing them the luxury to do whatever it is they want.

So, are you willing to take a bite of the Apple? full

Feature Editor

Katherine Campbell

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