Dear Mr. Berko:
I recall a column of yours from a couple of years ago that was negative on Apple because Steve Jobs died. Apple has gone up a lot since that column, so I wonder whether it has gone up too much to buy for a three- to five-year investment. Also, what is your opinion of Apple Watch, which wasn't on display at the recent Consumer Electronics Show in Las Vegas? I'd like to buy Apple because several of my friends and I believe that Apple Watch could be as popular for consumers as the iPhone and iPad.
-FS, North Miami, Fla.
Dear FS:
When a company has a good product, it advertises it. When the product is basically ordinary, the company markets it.
I don't like the Apple Watch and doubt it will be a success. It's an ugly, clunky, unattractive, superfluous gadget that will be a silly waste of money. Unfortunately, I've learned the hard way that among the reasons Apple has been so successful is its impressive ability to create huge, profitable mass markets where none existed before. Apple skipped the annual Las Vegas soiree in January, but several rivals, including Sony, were showing off their smart watches. However, Apple did the unusual and previewed its smart watch last September. The Apple Watch will come in two different sizes, and there will be three different "editions," plus an array of straps and add-ons that will price the thing between $450 and $700. It's Apple's first new product category in over five years and the first under CEO Tim Cook. So far, this newfangled product has failed to excite consumer interests. However, Apple-watchers are predicting smart watch sales this year to be between 10 million and 40 million units. To ensure consumer attention, Apple will come out with Apple Watch II in 2017, and in 2019, there will be Apple Watch IV, which will be water-resistant to 900 yards. Albert Einstein once remarked: "I fear the day technology will surpass our human interaction. The world will have a generation of idiots."
In December 2011, two months after Jobs passed away, when Apple was trading around $440, I told readers that without Steve, Apple would be dead in the water. Some big names on Wall Street also believed that Apple, without the iconic Steve Jobs, would get worms and lose its shine. When a reader asked whether it was a good stock to buy, I said, "No!" Apple without Steve was like the Miami Dolphins without Don Shula or the Tampa Bay Buccaneers with Lovie Smith. However, nine months later, Apple was trading at $705. I missed the top by only 265 points. Scores of readers chastised me for such lousy advice, and every once in a while, my elder grandson (who didn't sell his shares) revels in giving me a gentle jab. During the following 20 months, Apple retreated from its lofty $700 perch, falling to $385 in April 2013 before rising back to the mid-$600s by May 2014. Then, in July, the board of directors declared a 7-for-1 split, and Apple (AAPL) shares now trade at $127.
AAPL, one of the world's largest makers of computers and peripheral consumer products, also sells operating systems, related software services, developer tools and database software. AAPL operates 440 retail stores, including 178 stores in Europe, Asia and South America. Today AAPL has 96,000 employees, some of whom helped the company grow revenues from $6 billion in 1998 to $183 billion last year. So yes, I approve of your intent to purchase 100 shares. Though I can't identify with the iPod, the iPad or the iPhone craze (my phone is better than your phone), I acknowledge the narcotizing effect those products have on impressionable users. The new iPhone 6 and 6 Plus models and other AAPL products are selling like funnel cakes. Therefore, the Street believes that AAPL could report 2015 revenues of $215 billion and earn $7.80 a share. So at $127, AAPL trades at an attractive multiple of slightly over 14 times forward earnings. And if you toss in a possible dividend increase to $2.10 from $1.88, AAPL could trade upward of $140 this year.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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Published: Tue, Mar 24, 2015
