Why a skittish stock market flies to Apple for safety

Amid renewed fears about yet another COVID variant, this time, omicron, Apple stock once again became a flight to safety trade amid heavy technology sector stock selling.

Apple’s generates roughly $100 billion in cash per year and, for some investors, moving to Apple during COVID variant fears or other market volatility is akin to raising cash.

Tim Mullaney for CNBC:

With the S&P 500 down close to 5% from its all-time record and the majority of the pain since the renewed Covid fears started the market panic on Friday, Nov. 26 — and the tech-heavy Nasdaq Composite down 6%, including roughly 2% on last Friday alone — the maker of the iPhone and the most valuable U.S. company has reigned above the chaos. It rose 3.5% last week… For the last month, Apple’s return of 5.6% easily bests the 1.17% posted by BlackRock’s flagship U.S. Government Bond ETF.

“At this phase of the risk cycle, buying $AAPL = raising cash,” financial blogger and money manager Mark Dow tweeted, summing up the market’s mood.

At this phase of the risk cycle buying $AAPL = raising cash

— Dow (@mark_dow) November 30, 2021

[Apple has cash reserves of] about $62 billion, down from more than $81 billion a year ago. Apple has a good bit less cash than it once did, depleted by stock buybacks, but still, as Wedbush Securities analyst Dan Ives says, enough to run a small country. Apple also owns another $127.9 billion in liquid securities.

Then there is the company’s very consistent cash flow, now running at about $100 billion a year. About a quarter of sales now come from Apple’s services business, which is twice as profitable as hardware like iPhones and Macbook personal computers before accounting for corporate overhead and marketing costs, leading to expectations that cash flow will be at least $100 billion a year for the next decade, and probably keep rising, CFRA Research analyst Angelo Zino said.

“The market’s confidence is a pretty accurate perception of the products we see in the pipeline,” Zino said. “It’s a massive company. It’s a mature high-margin business in iPhones and iPads, with products that are second to none. The growth drivers for the next three years are in services, and the Apple Car is out there.”

MacDailyNews Take: As we wrote last Thursday, “Apple longs, pick your spots. Take advantage when advantages present themselves.”

Be fearful when others are greedy, and greedy when others are fearful. — Warren Buffett

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