“Just thinking about Terry and Jeanne Gregory’s portfolio can be a little scary. Retirees now living in Honolulu, the Gregorys have basically their entire life savings — about $2.5 million — invested in just one stock: Apple Inc.,” Jon Birger reports for Fortune. “The Gregorys’ love affair with Apple (AAPL) flouts every bit of investment advice doled out by magazines like this one and by mainstream investment strategists. No investor — especially a retiree whose portfolio should be geared toward income and wealth preservation, not growth and risk taking — should have all his money invested in just one stock. Right?”
Birger reports, “Well, before you dismiss the Gregorys as fools, ask yourself these questions. Do you live in a $650,000 luxury condo a stone’s throw from Waikiki Beach? And did you have the smarts, conviction, and stick-to-itiveness to turn a $200,000 investment in 2004 — in a seemingly past-its-prime computer stock with a mere 3% market share — into a nearly $3 million windfall that financed a dream early retirement? ‘All the advice was to diversify, but in our experience, diversification didn’t really work,’ says Jeanne Gregory, 62, who, like her husband, Terry, 58, is retired from the advertising industry. ‘Diversification,” adds Terry, “may be good for preserving your wealth, but we needed our wealth to grow.'”
“The recent selloff is definitely a turning point for the stock. The question is, Turning to where? Skeptics see it as the beginning of the end of Apple’s amazing run: “The pie is almost baked,” declares Nomura analyst Stuart Jeffrey. For the true believers, however, it’s an early Christmas present — the ultimate door-buster for Wall Street bargain hunters. Apple’s price/earnings ratio of 13 is near a 10-year low, and Apple now has a lower valuation than large-cap peers with far inferior earnings growth such as Wal-Mart (14 P/E) (WMT), Coca-Cola (20) (KO), Pfizer (19) (PFE), and Qualcomm (18) (QCOM),” Birger reports. “The stock is so cheap that Mark Mulholland, portfolio manager of the Matthew 25 fund (MXXVX), has been adding to his Apple position even though he already had an 18% position in the stock before the decline. ‘It’s unbelievable,’ Mulholland said when the stock dipped below $550. ‘I am so psyched to be able to get shares of Apple at this level.'”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Tayster” for the heads up.]