I find it impossible to buy things that keep going up in price be it clothes, hamburgers or stocks. On the flip-side, when prices drop, I get an irresistible urge to reach for my wallet. That’s why I’m starting to get rather excited about some of the opportunities emerging in the US stock market. I’m not a buyer of these companies yet, but have started to pay close attention to two of the best performing large-cap stocks of the past decade; Amazon (AMZN) and Apple (AAPL).

 

APPLE COST $134 A YEAR AGO. TODAY IT’S TRADING AT $94

A DECLINE OF 29.8%! It’s down by so much that Alphabet (Google) is now the world’s most valuable company. The last time Apple tanked, in 2013, it turned the corner after dropping 40%. I remember Carl Icahn, one of its major shareholders at the time going on CBNC calling the stock a slam dunk buy. I didn’t listen and have regretted it ever since.

What seems to have caused the panic this time is fears over slowing sales of its flagship product the Iphone. That was indeed what caused the panic back in 2013 as well, when the story was that Samsung was eating into Apple’s marketshare with its price competitive Galaxy series. Now as then, I think such fears are overdone. Apple fans are loyal and will stick with its products.

If you’ve once owned an Iphone or MacBook, chances are your next phone/laptop will be in the same series. At least that’s how I roll. Seeing as I’m an extremely picky and difficult consumer, when a company can keep me as a customer, they’re doing something right. Of course there’s much more to the Apple story than just my personal preferences. There’s its:

        ★ legendary cash-pile

★ share buyback program

★ design prowess

★ cool factor

★ ease of use (products)

★ tax ingenuity

★ low P/E

★ worldwide sales

I’ll likely snap up a small position next week with a 2-3 year investment horizon. If it comes close to $80 I’ll consider going in heavy.

 

AMAZON THE WORLD’S LEADING ONLINE RETAILER ENDED 2015 AT $696. IT’S $502 TODAY. 

A DECLINE OF 27.8%! Amazon’s P/E is still nothing short of insane (it has averaged 500 over the past 5 years) and the stock possibly have a lot further to fall if the US really enters a recession. If not, this should be an obvious buy the dip scenario. So I’m not pulling the trigger just yet but will take a wait and see approach.

It’s a good company that is still growing at the expense of the Walmarts of the world. As long as it keeps expanding and the world adopts America’s online shopping habits, this stock will be on my radar. Particularly when its down by roughly 30%.

What currently keeps me from buying is that I’m not fully convinced that P/E is justified. If Amazon stock goes closer to the $350-400 range I will likely become a shareholder.

 

READ NEXT: CONTRARIAN INVESTMENT STRATEGIES 101

  • Tom Utenetternavn

    Any thoughts on Netflix as well? I know they don’t have the history yet, but as they continue to self-produce they will probably still be a major player for years to come?

    • I don’t follow Netflix at all so don’t have an opinion or any advice on them.

  • Ole

    Is this more a short term aproach or is it a long perspective? What do you think about audible as a stock? I know they sell a lot of books, and people are starting to listen more on books. How do you recomend to look into a stock to know if it has potential?

    • I write about the fundamentals here: http://haraldbaldr.com/investing-101-which-stocks-to-buy/

      I believe Apple and Amazon will be trading at least higher than their current level within 3 years but there are no guarantees. If I buy Apple this week (I’ll post it if I do) I envisage selling within 3 years. However if it does not recover I’m not averse to holding it for much longer. It’s a company with staying power.

      About Audible, I’m not familiar with them.

      Hope this helps 😉

      • Ole

        Thanks. It was a very good article. But I have some more questions 🙂 I have just started to buy funds and stocks. I’m now wondering what funds I should buy? Is it smart to have four, five different funds or to just choose one or two? I’m thinking of technology, health, sea food and a wider index fund with different cathegories. What do you think of when you choose a fund?

        What do you think of sdrl now?

        • I can only say what I would do as I don’t know your financial situation. I’d stay away from mutual funds and buy index funds. When I choose an index fund I look mainly at the growth prospects for the underlying sector/country. Second I look at sentiment. I prefer to buy when people are running for the hills rather than cheering something on.

          SDRL is one of the riskier stocks out there as it has been for a few years now. Anyone buying now will either make 500% in a couple of years or lose all.

          • Ole

            Ok, I can use maybe 3000 a month on savings in stocks and funds. I can risk loosing 1000 maybe on some more risky stocks. So would you then put your money in one fund or different funds? I think my primary savings will go into funds, but maybe try some stocks that gives more . What would you do?

          • I would not go for risky stocks at all but just one or two index funds. Dollar cost average in over time and do not care whether you’re down one year to the next. What matters is the returns over a 10 to 20 year period.

          • PeteyBrian

            If the price of oil nears a bottom or hits or tests $20 level and many of the drillers are out of business, I’d like to own one of the few drillers that are still in business should the price of oil start to rise…

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