Three reasons NOT to buy AAPL
By Dian Vujovich
How about that Apple stock? Up. Down. Where it stops, nobody knows.
No matter what you think about Apple the company, its products and what’s in the pipeline for its future, the stock is not a buy for everyone.
In other words, even though the world’s largest capitalized company and most recognizable brand name on the planet is a tempting investment choice don’t assume that it’s a ‘best ‘investment choice for you.
Here are my three reasons why:
First, it’s expensive. Decide to jump on the Apple (APPL) bandwagon for the first time and purchase 100 shares of the stock at yesterday’s closing price of $610 a share (4/25/12), you’ll have to dole out $61,000, not including commission. For those with oodles of money that’s not a big deal. For those without, it is.
That said, for the richies and not not-so richies alike the big money has already been made in Apple.
Second, it’s not going to be a one-, two- or three-bagger anytime soon. Or maybe ever.
Peter Lynch— the portfolio manager who gave the Fidelity name stellar brand recognition and made lots of money for investors who owned shares of the Fidelity Magellan fund in the day—is the guy who came up with the bagger term. A one-bagger was a stock that doubled in value while holding it; a ten-bagger one where its per-share price increased ten times.
So for those who say Apple’s per share price is going to $1220 and beyond —1220 would make it a one-bagger from $610—I’m thinking that sounds an awful lot like Buzz Lightyear thinking.
Currently, Yahoo Finance has a target price of over $704 a share on Apple, if the stock hits that price it would have moved up about 15 percent. That’s nothing to stick one’s nose up at. But, given that Apple’s stock has already appreciated over 50 percent since the beginning of the year, one has to ask themselves how high they think the price can go. (It ended 2011 at $405 a share.)
Of course that’s not to say Apple’s price can’t continue to soar but thinking baggers is kind of extreme.
As an aside, I asked my neighbor if she would buy Apple now. After saying she’d have to borrow the money to purchase 100 shares, she say that she would consider buying 25 shares. Then I asked her what kind of return she would expect. “I’d expect it to double in price and if it didn’t do that within say a year or two, I’d sell it.”
And the third reason not to buy Apple stock? It’s the hot gotta-have investment.
Following the crowd typically doesn’t make investors rich; getting in early and staying in does.
It’s late in Apple’s game and while I’m hoping that this company has a wonderful future and continues to grow but history shows us that trees don’t grow to the sky. And, investment professionals will tell you that there are numerous other places to invest $61,000 when looking for growth opportunities.
Bottom line: Anyone with bagger’s on the brain might consider bagging the Apple.
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