Our contributor is trading in his January pick for a new stock, which has recently been endorsed by hedge fund manager Julian Robertson, who says he is “extremely positive” on the shares.
Sell: Fossil Group (FOSL)
from Cabot Benjamin Graham Value Investor
Fossil Group (FOSL) Results have been disappointing during the past couple of quarters. Recent acquisitions are a positive, but the company is hoping to compete effectively with the Apple smart watch. They might succeed, but the risk is too great that they will fall short. Sell.
New Pick: Buy: Apple (AAPL)
from Cabot Benjamin Graham Value Investor
Apple (AAPL) makes and sells smartphones (iPhones), tablets (iPads), computers (Macs), media players (iPods), and now Apple watches. The highly successful launch of iPhone 6, iPhone 6 Plus and Apple Watch will lead to accelerating sales and earnings growth during the next two years and beyond.
After reporting lackluster results in 2013 and 2014, sales and earnings growth will surge during the next couple of years. Sales for the 12 months ending June 30, 2016 will climb 14% and EPS will advance 23% to 9.85.
At 15.9 times trailing 12-month EPS with an expected 5-year EPS growth rate of 14.3%, AAPL shares are clearly undervalued. The balance sheet is very strong with low debt and lots of cash. The current dividend yields 1.6%, after a healthy increase in April. I expect AAPL shares to climb to 170.00 within one year. Buy AAPL at the current price.
J. Royden Ward, Chief Analyst, Cabot Benjamin Graham Value Investor, www.cabot.net, June 26, 2015