Today we have our second Top Pick of 2013, a contrarian play from Heartland Adviser Editor Russ Kaplan.
“One stock you probably thought I wouldn’t recommend is Apple, Inc. (AAPL, $522).
“Now, Apple is a good case for the role psychology plays in investments, and this is when my B.A. and M.A. in Sociology comes in very handy. Apple has been in business since 1977 when it was founded by Steven Jobs and Steve Wozniak.
“Mr. Jobs was the driving force that made the company so successful over the years. He also founded Pixar, the animation company that has gone on to produce a new type of animation for movies such as the Toy Story films, Cars, The Incredibles and more.
“Jobs’s vision was continually focused on improving technology for the future, which led the company to create more and more innovative personal computer technology. The Apple computer was the forerunner of the future of personal computer technology. Because of its seamless interface concept it went on to affect all aspects of the computer industry. The dominant technology and concepts for MP3 players, smartphones and tablet computers were originally introduced by Apple products: iPod, iPhone and iPad, which were later adapted by other companies.
“Since Job’s death in October of 2011, Tim Cook, who was handpicked by Jobs to become the CEO of Apple, has kept the company in good shape. This year Apple broke the $700 level and analysts were saying it was the greatest thing since sliced bread. Later this year, after a 25% correction, all of a sudden analysts are now saying it is mature company past its prime and should be avoided. Honestly, has the company really changed in such a short time, or is this another speculative algorithm from the Quantitative Analysts?
“By all my measures of value, Apple is a good buy. For example, its price/earnings ratio is 11, which is less than the total market, and about one half of Apple’s normal price/earnings ratio. Yes, there is constant change in the computer industry, but Apple, with its management skills and huge trove of cash, should be able to adapt to this in its usual seamless manner. Apple pays a dividend of about 2%, so if you are looking solely for income this is not a stock for you.”
- Russ Kaplan, Heartland Adviser, December 3, 2012