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:
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.