Why Apple’s Blowout Earnings Show It Still Deserves A Place In Your Portfolio
There’s been a slew of economic news over the past week, from Fed meetings to GDP numbers to the infrastructure bill making its way through Congress. But amid all of this, it’s easy to forget that there’s also been a lot of news regarding what really drives prices for individual stocks.
I’m talking about earnings.
We’re smack dab in the middle of earnings season. And this has been one to remember…
The big tech giants — Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), and Facebook (FB) — have all reported results in the past few days. And they put up some monster numbers.
Today, I want to hone in on the quarterly results for one of these companies — Apple (Nasdaq: AAPL) — and discuss why you shouldn’t write off having it in your portfolio if you don’t already.
Apple’s Blowout Results
The world’s most valuable company keeps chugging right along.
Apple reported a blowout fiscal third-quarter – traditionally its weakest as consumers typically wait for new iPhone models to arrive (which traditionally happens in Q4).
Revenue jumped 36% to $81.4 billion, and the company posted record Q3 profits of more than $36 billion.
The important thing to understand about Apple is that it is increasingly less reliant on iPhone sales. Make no mistake, they’re still crucial to the company’s success. But Apple is evolving before our very eyes – turning into a “wearables” and services powerhouse.
In fact, those two categories grew revenue by 33% and 36% last quarter, respectively.
Not to be outdone, iPhone sales grew 50%. But for the first time in a long, long time, iPhone sales represented less than half of Apple’s revenue. That’s a big deal.
Consider this, Apple’s “services” segment generated $17.5 billion in revenue last quarter, thanks to700 million paid subscriptions for everything from iCloud to Apple Music. Not only is that a new record for the segment, but it now represents more than 20% of the entire business.
To fully understand how well Apple is doing right now, think about this… If the company were to close up shop for the rest of the year, with net income of $74.1 billion, it will have already had its best year in terms of profitability. Ever. (The previous number is $59.5 billion in 2018.)
If you don’t already own Apple, my question for you would be: “Why not?”
It’s important that investors don’t lose sight of this amid all the talk of the delta variant of Covid-19, inflation, meme stocks, and more. What’s more, if we can understand just how far companies like Apple have come – and just how truly dominant they are today – we may also begin to understand why they are still “buys”.
I’ve learned this from personal experience. I’ve owned Apple since 2014. And two of the biggest mistakes I’ve made in my investing career are not buying Apple sooner – and not buying more of it when I finally did.
But this isn’t really about Apple. This can be applied to just about any of the Big Tech names out there. Google, Facebook, Amazon, take your pick…
In a world where just about every individual investor is looking to “beat” the market, for most, that means trying to find that “next” Amazon, Facebook, etc. In reality, at just about any point over the past 15 years, most of those folks would be a lot better off just buying these names – and they would have still beaten the market.
Of course, that doesn’t guarantee future results. But you could do a lot worse.
I’ve long advocated that investors should have a group of “no-brainer” stocks at the core of their portfolios. And I’m not alone in this sentiment. In fact, my colleague Jimmy Butts, Chief Strategist of Top Stock Advisor, has advocated this for years.
As he puts it, having a group of stocks like this in your portfolio makes it easier for you to sleep at night. Having a group of “high confidence” names in your portfolio also makes it a lot easier to take a big swing at that next big opportunity if and when it comes across your radar.
Speaking of which, Jimmy and his team have released a brand new report about his latest “game-changing” research. To check it out, go here.