“Apple’s (APPL) stock trades at a low earnings multiple, one that has gotten lower as the shares enter correction territory — which they officially did today. History may show it’s just another gift for Apple bulls,” Brendan Conway reports for Barron’s.
“But try viewing the company’s earnings power versus the similar contributions of the rest of the Standard & Poor’s 500-stock index (SPY) components,” Conway reports. “Then compare that percentage to the company’s share of the index’s market value. For at least this quarter, it’s going to be tough to argue that the stock pulls its weight.”
Conway reports, “S&P Dow Jones Indices analyst Howard Silverblatt writes clients today that Apple isn’t expected to match its market price on a 1-to-1 basis versus the rest of the Standard & Poor’s 500-stock index (SPY). That is, if we divide its percentage of earnings contribution by its market value, its percentage contribution will be lower than average.”
“How much does this matter? In the short run, not much. The fourth quarter is expected to be a big time for Apple. Phone sales, the holiday season and more extrapolate to what Silverblatt says is 6% of the expected index earnings power, or 1.3 ratio based on the current stock price,” Conway reports. “But if it keeps up, watch out. It would suggest that investors have so aggressively bid up the stock that the company no longer pulls its weight in the broad stock index.”
Read more in the full article here.
MacDailyNews Take: Ignoring fundamentals in favor of poppycock is not a sound investment strategy.