Apple has repeatedly been in the news recently. Whether it’s unveiling their new iPad, having eye popping first weekend sales for a new device, or pronouncements by analysts that it could become the first trillion dollar company by market cap in the next twelve months. In March the firm announced it will be issuing its first dividend since 1995 and buying back stock as a use for a portion of its massive $100 billion cash stockpile. The stock price has already seen an extraordinary surge forward this year as its shares have gained over 56% and it is up 88% over the past twelve months. In their last earnings report the firm’s profits more than doubled and revenue grew by 73%. With its surging growth and news of the issuance of the dividend, does it mean that the stock is undervalued and you should purchase shares of Apple for your portfolio?
We believe that markets are very efficient and take into consideration all publicly available information and assimilate it into the stock price. Thus, all expected future growth of the company is factored into what the sock price is currently. Could the stock continue to rise this year? Absolutely, but this would be based on new information that comes forward about the company, consumers, or the overall economy.
Given the highly efficient nature of the stock market it is important to not try and make bets on certain sectors or individual stocks, but to diversify broadly across all sectors and market capitalizations. With this broad diversification your investments are not tied to the performance of a relative few companies or industries and your portfolio will see a much less rocky performance.
Index Performance March 1Q Trailing 1 Yr
US Stock (Russell 3000) 3.08% 12.87% 7.18%
Foreign Stock (FTSE AW ex US) -1.41% 11.53% -6.87%
Total US Bond Mkt. (BarCap Aggregate) -0.55% 0.30% 7.71%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) -0.18% -0.11% 3.04%
Municipal Bonds (BarCap 1-10yr Muni) -0.62% 0.53% 7.47%
Cash (ML 3Month T-Bill) 0.01% 0.01% 0.06%