Berkshire Dumped Apple, Then Why Should You Pay More For It And Get Less?
Why would you bet on Apple (NASDAQ:AAPL) when you can get a better reward by paying less elsewhere? Here are two stocks that are valued lower than Apple, but have better momentum in their fundamentals and there is evidence of the market recognizing this difference.
Better Buys Than AAPL – ACIW & CLS
| SECTOR | P/EBIT | LTM Rev Growth | LastQ Rev Growth | LTM OpMargin Change | |
|---|---|---|---|---|---|
| AAPL | Information Technology | 28.34 | -0.9% | -4.3% | 1.8% |
| ACIW | Information Technology | 19.16 | 6.5% | 9.1% | 6.3% |
| CLS | Information Technology | 11.13 | 13.5% | 23.3% | 1.9% |
For instance, you pay $19.16 per $ of EBIT for ACIW vs $28.34 for AAPL, and get higher annual growth (6.5% vs -0.9%), higher quarterly growth (9.1% vs -4.3%), and more margin increase (6.3% vs 1.8%).
Note: PEBIT = market cap / last 12M operating income | LTM = Last 12 Months (last 4 quarters)
- With Apple Stock At All-Time Highs, Will Q4 Earnings Deliver?
- How Apple Gets To A $5 Trillion Valuation
- Weak iPhone 16 Sales Don’t Tell The Whole Story For Apple Stock
- Why Apple Stock Is A Safe Haven In An Uncertain Market
- Will Apple’s Q3 Results Get An AI Bump?
- Can AI Launch Drive Apple Stock To $300?
Has the market rewarded these bets recently?
| Return | ||||
|---|---|---|---|---|
| SECTOR | 3M | 6M | 12M | |
| AAPL | Information Technology | 16.1% | 18.3% | 22.8% |
| ACIW | Information Technology | 24.8% | 45.7% | 94.1% |
| CLS | Information Technology | 2.5% | 25.7% | 135.4% |
There is evidence of market reward as ACIW stock has returned 24.8%, 45.7%, 94.1% in the last 3M, 6M, 12M which is higher compared to 16.1%, 18.3%, and 22.8% for AAPL.
How did these metrics look 1 year ago – Could AAPL’s combination of higher valuation & lower growth persist?
| SECTOR | P/EBIT | LTM Rev Growth | LastQ Rev Growth | LTM OpMargin Change | |
|---|---|---|---|---|---|
| AAPL | Information Technology | 27.47 | -0.2% | -2.5% | -1.8% |
| ACIW | Information Technology | 16.52 | -1.4% | -10.3% | -5.7% |
| CLS | Information Technology | 8.27 | 23.6% | 12.9% | 0.8% |
AAPL still had a higher valuation of $27.47 vs $16.52 for ACIW, but higher annual growth (-0.2% vs -1.4%), higher quarterly growth (-2.5% vs -10.34%), and more favorable margin change (-1.8% vs -5.7%)
Note: PEBIT = market cap / last 12M operating income | LTM = Last 12 Months (last 4 quarters)
Additional reference metrics
| SECTOR | PS | Market Cap | LTM Revenue | LTM Opinc | LTM Opinc Margin | |
|---|---|---|---|---|---|---|
| AAPL | Information Technology | 8.78 | $3.4 Tril | $382 Bil | $118 Bil | 31.0% |
| ACIW | Information Technology | 3.30 | $4.9 Bil | $1.5 Bil | $254 Mil | 17.2% |
| CLS | Information Technology | 0.67 | $5.9 Bil | $8.8 Bil | $526 Mil | 6.0% |
Note: PS = market cap / last 12M revenue | LTM = Last 12 Months (last 4 quarters)
We choose our bets thoughtfully. Trefis High Quality Portfolio (HQ) outperformed S&P 500 in 2023 by >10% despite having limited exposure to the magnificent 7 stocks (no AAPL, TSLA, AMZN, NVDA), as our other bets paid off. For instance, CRWD, NOW, ADBE and INTU, IT stocks part of HQ, returned higher than AAPL. Overall, HQ outperformed the S&P in each of the years – 2021, 2022, and 2023. Here is HQ’s full story