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Apple: A Buying Opportunity

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Apple (NASDAQ: AAPL) has had a rough 6 months.  It has fallen from just over $700 per share in the fall 2012 to a low of $432.48 in the early part of 2013.  There were a lot of concerns that led to Apple’s slide.  First, Apple was unable to meet demand for its iPhone 5.  Second, there were questions about a lack of new innovations on the part of Apple.  Yes they dominate areas such as portable music players, tablet devices, and computers, but what would be their next big idea.  That still has not been uncovered.  So investors need to ask themselves whether the current price slide is justified.  I don’t think it is.

© Mike Hodges

First, Apple is still dominant across a lot of product areas.  Yes, they haven’t been able to penetrate new areas like they have in the past, but I think this is only a matter of time.  I have new innovations might include an Apple TV, a lower priced iPhone, and a house system that is able to smartly control all devices.

Second, Apple has an incredible cash position.  With over $130 billion in cash, Apple has the ability to pursue any opportunity it deems wise.  The company could use the cash in a special dividend to reward loyal investors.  The company could pursue a possible merger with Netflix (NASDAQ: NFLX).  The company could also use the cash to enter additional markets and continue its strong history of innovation.

Lastly, Apple’s valuation has become so attractive, that it rivals companies such as Microsoft (NASDAQ: MSFT) and International Business Machines (NYSE: IBM).  Microsoft and IBM are great companies but they don’t have near the growth rate and innovation possibilities that Apple has.

I expect value investors to step in soon and start pushing Apple’s price back up to where it belongs.

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