Currently Apple is trading at a low enough multiple that the risk to the downside for investors is very low. I would recommend going long Apple on a pullback. Selling out of the money put options is an attractive option as well, so long as you can afford buying the stock outright if you are assigned.
Recently, it was suggested in an article on Bloomberg, that Apple would go to the woodshed if the economy were again to succumb to a recession. It was mentioned that this happened a few years ago during the last recession. Although, Apple stock did fall to less than $80/share, the company’s year over year profit did not suffer as the article implied. Actually, the company continued to show growth, which was remarkable given the circumstances. The market had been pricing in a slowdown in consumer demand when, for Apple, growth was accelerating.
As we came out of the recession the stock adjusted. The difference is that it’s P/E did not inflate when it’s stock went up. When adjusted for it’s cash hoard, and comparing it’s earnings multiple to that time, Apple stock is valued roughly the same as it was when it was trading at less than $80/share. That implies that there is little downside risk in this stock. Since Steve Jobs resigned as CEO, the uncertainty of his health has been taken out of the equation. The implied volatility in the stock is at a low, and confirms this assertion. Put options are trading at lower premiums since his resignation was announced.
