(BFM Bourse) – Technology stocks have been weighed down for several months, especially with the monetary tightening at work. Apple in particular has largely retreated, to become (despite its still colossal size) cheaper than Amazon or Microsoft.
It is an understatement to say that the markets have not been favorable since the beginning of the year, as many new investors have painfully experienced in recent months. Down about 12% since the start of the year, the Paris market is not even the most to complain about compared to the flagship American index S&P 500 (-18%) and especially the Nasdaq Composite (-27 %).
In fact, it is technology stocks, which had benefited for many years from generous valuation multiples, which are the most affected by the prospect of a rise in interest rates. The most emblematic, the one that has long crowned the crown of the world’s largest capitalization, has not escaped it: with a decline that now reaches more than 20% (i.e. a “bear market” in the language of a stockbroker, without this threshold does not have any particular technical or financial significance), Apple has even been overtaken by Saudi Aramco again. Since January, the action has lost 24%.
A sign of the times, because the mere decrease in the valuation multiples of the Californian company does not explain everything: the surge in oil prices has obviously boosted the price of the Saudi energy giant in parallel. Its capitalization is currently more than 2,300 billion dollars, while Apple is only worth around 2,200 billion, or 24% less than at the start of the year…
One of the cheapest GAFA
Handicapping for the indices to which Apple belongs, given its weighting, this drop in the specialist in new technologies on the stock market is beginning to place the title on the radar of certain investors in search of solid fundamentals at low prices, potentially put off so far by the ratios requested. a few months ago to buy the title.
To take the most basic ratio, ie price divided by earnings per share (PER), Apple now only trades at 22 times its earnings. In absolute terms, a PER does not mean much, but compared to a fallen star such as Nvidia (despite a price halved, the graphics card producer is still at 44 times) or an Amazon (51 times), force is to recognize that the group founded by Steve Jobs is not particularly expensive. Microsoft pays a little more (24 times), only Meta posting a lower multiple, but who wants to buy a platform that is now losing users?
Apple can even rank among yield stocks for a decade. Admittedly, the amount of the dividend paid last year ($0.92 per share, in four payments) does not give a staggering return: around 0.65% on the current price. But since the group started paying a dividend again in 2012, there has been a regular increase in the coupon, which increases by 5 to 10% each year. And given the way in which the group has been able to create an ecosystem of services around its equipment (used by nearly 2 billion people in the world…) allowing it to increase its high-margin revenues even more, analysts are betting on continued growth in profits, and therefore in the dividend, at a double-digit annual rate. In other words, the ball at time t is still thin, but the market only sees it growing. Not to mention the share buyback program, to which an additional budget of 90 billion dollars was recently allocated…
Well positioned against inflation
According to Bank of America (admittedly went from neutral to buying the title with very bad timing, at the end of 2021), Apple is also not particularly threatened by soaring consumer prices. In a recent study, the research department reviewed the performance of S&P 500 companies over the past twenty years by comparing them to the evolution of inflation according to an in-house composite indicator (which Bank of America has used since 1975 , and which enabled him a year ago to predict the episode of hyper-inflation which has since shaken the markets). A handful of values present a positive correlation with this indicator, coming from different sectors – including the manufacturer of tractors Deere, the oil company Devon Energy, the mining group Freeport-McMoRan or the essential Apple.
Among the “fundamental” investors who bet heavily on the Californian company, Warren Buffett is undoubtedly the best known. Apple has become over time the largest position in the listed portfolio (almost 40%) of its investment company Berkshire Hathaway.
Another large institutional shareholder with a view to long-term return is less known: it is the Swiss National Bank. Indeed, the statutes of the SNB allow it to invest up to 20% of its reserves in the financial markets and does not deprive itself of the income that its Apple shares are gradually bringing in… actions of the Swiss central bank are almost passively managed so as not to unbalance the market, as closely as possible to the indices with certain exclusions for ESG reasons (environmental, social and governance criteria), like Norges Bank as well present in the capital of the apple firm.
Guillaume Bayre – ©2022 BFM Bourse
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