The impact Steve Jobs has had on the world we live in is undeniable. Whether you are reading this article on an Apple device or not, chances are there is one close by. Maybe it’s your son’s iPhone, your sister’s iPad, or your mother’s MacBook Pro. With more than 1.8 billion devices in use by customers around the world, the California-based tech giant has grown to heights investors once thought impossible. But success did not come easy in the early years.

In fact, from 1981 to 2007, the average Apple (Nasdaq: AAPL) stock price per year was under $5 per share. The future did not look bright. It took 26 years to right the ship. If you look at AAPL stock price history, you can clearly see things start to improve after 2007, the year the iPhone was released. Including the obvious exception of the 2008 market crash, Apple has only had three down years since 2002. That is an impressive run by any standard.

How To Invest In Apple (3 Steps)

If you believe in the success of Apple moving forward, now is your chance to put your money where your mouth is. So many people say “if only I had invested in Apple 20 years ago”. Well today is your chance to write your future success story. If you are interested in purchasing shares of Apple, here’s what you need to know.

1. Decide How You Want to Invest

Are you a more do-it-yourself type of investor? Or do you prefer to use a financial advisor or a more automated approach through your retirement accounts?

There are many ways to gain access to shares of Apple (Nasdaq: AAPL). You can invest in Apple by itself, buy shares of mutual funds that include Apple stock, or consult an advisor to purchase the shares for you. Fractional shares are also available through many brokerage accounts for investors with limited access to capital.

Once you decide how you want to invest, you’ll need to select an investment account.

2. Select an Investment Account

There are many types of accounts you can use. Most likely you already have a 401(k) or an IRA set up through your employer. In which case you can purchase shares of Apple directly through there. Additionally, you could open a college savings (529) account or a taxable brokerage account.

Taxable (non-retirement) brokerage accounts have become very popular in recent years as they allow you more flexibility to sell and cash out shares at any time without penalty. If you aren’t currently using a broker, Vanguard, Fidelity, Charles Schwab, Robinhood and Webull are a few options with low or no-cost fee structures.

3. Place an Order

Ok so you’re all set up with your brokerage account and you’re ready to place an order! Next, you’ll want to decide how many shares you’d like to buy and at what price. You have two options here…a market order or a limit order.

Remember you’ll need to deposit enough money into your account to afford the shares. As mentioned earlier, fractional shares are an option that eliminates this problem.

If you’ve just learned how to invest in Apple, it might make sense to execute your first order as a market order. This just means you are buying the stock at the price it is currently trading and this works well if you plan on keeping the stock for many years to come.

On the flip side, if you are looking to trade in the short term, you may want to be more selective about when you place your order and at what price. This is where a limit order will come into play. You have some options in this area, but we recommend setting a limit price that’s good until the end of the trading day.

This simply means you determine the maximum price that you’ll pay for the asset. If the stock trades lower than that price during the day, your order will be filled. If not, the order will be canceled and you’ll have to enter it again the next day.

The experts at Investment U have decades of experience providing the latest market insights and analyzing the latest trends. Learn how to invest in stocks, sign up for the Investment U newsletter or read the next article below.

Read next: How to Invest in Google

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These are all good questions that savvy investors should be asking themselves. In the end, nobody knows for sure what’s in the future for tech stocks.

But just because there was a dip in tech stocks today doesn’t mean they’re not still a great investment for the future. Let’s dive into some details now.

What Happened to Tech Stocks Yesterday?

The stock market took a tumble yesterday, largely driven by tech stocks.

But of course, just because something major happened yesterday doesn’t mean the trend will continue with tech stocks today.

Let’s take a look at how the overall stock market dropped yesterday:

• The Dow Jones Industrial Average dropped 807.77, or 2.78%.
• The S&P 500 dropped 125.78, or 3.51%.
• The Nasdaq dropped 598.34, or 4.96%.

These are some pretty significant numbers. And the fact that the tech-heavy Nasdaq declined by the largest percentage indicates the pullback in the tech sector. Stocks like Amazon (Nasdaq: AMZN), Apple (Nasdaq: AAPL), Alphabet (Nasdaq: GOOG), Microsoft (Nasdaq: MSFT) and Facebook (Nasdaq: FB) all saw large declines in a tech market that has been heavily bullish as of late.

So was this mere profit taking? Or is this a sign of some underlying fundamental problems with tech stocks? Plus, what does it mean for the future? Should you invest in tech stocks today, or is this the beginning of a trend?

Why Is This Happening?

Before today, the tech sector seemed impervious to the events of a pandemic and the resulting economic problems. But tech stocks today have shown that they are not so impervious after all.

There are different theories as to why they may have suddenly taken such a plunge. Generally, these stocks have been top performers, but some analysts have speculated that stock prices have diverged too far from the underlying fundamental values of the companies.

Of course, it’s also possible that what we saw in the markets today is more reflective of broader economic concerns.

But there may be some good news on that front: Economists are expecting to see 1.35 million payrolls added for an unemployment rate that will finally tick below 10% for the first time in months.

There may be some additional factors also motivating the sell-off, though. For example, as politics continue to heat up and we get closer to a contentious U.S. presidential election, fears of increased antitrust and regulatory action may be increasing.

But still, there’s no evidence to support that this triggered the sudden pullback of tech stocks today.

Are Tech Stocks Still a Good Investment Today?

It’s certainly fair to wonder whether tech stocks are still a good investment. On the one hand, we now know that tech stocks are not impervious to declines in 2020.

Apparently, tech kryptonite does exist.

On the other hand, one could argue that if they were a great investment two days ago, tech stocks are now an even better investment today. After all, cheap tech stocks – or at least cheaper ones – are now in higher supply.

The truth is, nothing fundamental has really changed for the best tech stocks between two days ago and today. Prominent companies like Apple and Facebook were great companies before, and they’re great companies now. And they just got significantly cheaper.

Take a quick look at these percentage declines:

• Apple: -8.01%
• Amazon: -4.6%
• Alphabet: -5%
• Facebook: -3.8%
• Netflix (Nasdaq: NFLX): -4.9%.

If you’re looking at the short term, you may want to be cautious about playing these stocks. Nobody has a crystal ball and nobody can see for sure what will happen in the coming weeks or even months.

But if you are looking to invest for the long term, you may be looking at a great opportunity to invest in tech stocks today.

Concluding Thoughts on Tech Stocks Today

After declining more than 5% yesterday, it is hard to say what will happen to tech stocks today. On the one hand, they could continue to plunge if the markets head toward correction territory. On the other hand, they could handily rebound and investors could see some nice gains.

And the decline of tech stocks could even create some interesting opportunities in some other areas. For example, despite the fact that cruise stocks have been absolutely hammered during COVID-19, Carnival Corp. (NYSE: CCL) was up 5.2% on the day yesterday, while Macy’s Inc. (NYSE: M) was up a very nice 7.94% despite all of the struggles in retail these days.

It’s impossible to know for sure what will happen with tech stocks in the short term. So try to ignore most of the noise and decide whether you think, in the long term, big tech is still a smart play. If it is, then it might be a great opportunity to go shopping for some tech stocks today.

Read Next: 6 Best Biotech Stocks to Watch

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Apple (Nasdaq: AAPL) had a heckuva 2019.

The Silicon Valley giant’s stock surged a whopping 86% last year, as the iPhone maker’s market cap hit $1.3 trillion.

That translates to a gain of $556 billion in just 12 months.

To put that number in perspective…

Apple’s gain in a single year is almost exactly equal to the market cap of Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B)… and more than the entire value of all but the top four S&P 500 companies.

But Apple is hardly just an overnight success.

Since Tim Cook became Apple’s CEO in August 2011, the stock has soared from a split-adjusted $53.74 to around $310. That boosted the company’s valuation by more than $1 trillion.

After Apple’s fantastic run, the question arises… Should you hold on to your Apple stock, or should you take your money and run?

Is Apple’s Valuation Justified?

Before 2019’s run, Apple had always traded at a discount to technology stocks.

Tech stocks traded with an average forward price-to-earnings ratio of 20 or more. For Apple, that same number was around 14.

That is no longer the case.

Apple now trades for about 26 times projected earnings. That’s a 10-year high.

All this during a time when Apple’s fundamentals have been distinctly unimpressive.

First, it’s no secret that 2019 was not a banner year for Apple products. The iPhone 11 was ho-hum. And the market greeted Apple TV – a streaming service to rival Netflix – with a collective yawn.

Second, and more worryingly, Apple reported a net income decline of 7% in 2019 compared with the previous fiscal year.

Yet the company’s earnings per share (EPS) contracted only 0.37%.

How did Apple pull off this bit of accounting magic? Share buybacks.

Much like Berkshire Hathaway, Apple has too much cash. So it spent a big chunk of this cash buying back its stock. Apple retired 6% of its share count in the last 12 months.

If not for buybacks, Apple’s EPS would have been negative.

That kind of accounting magic doesn’t usually merit a doubling of the stock price.

And with the shares trading at a record high, don’t count on buybacks to boost Apple’s stock price in the future.

Why Apple Will Keep Going

Looking at the numbers is one thing. And no doubt Apple is no longer the bargain it was a few years ago.

But there are some critical reasons Apple stock remains a safe investment. And these reasons have to do with Apple’s “moat” – its long-term relative position in the marketplace.

Here are three ways I think of Apple’s moat.

First, Apple’s products are addictive. You may not think of your Apple device like tobacco or heroin, but checking your iPhone triggers similar dopamine receptors in your brain.

And there are thousands of smart people in Silicon Valley looking to make Apple products as addictive as possible. Addiction ensures that there will always be a demand for your product.

Second, Apple locks you into its ecosystem.

As I live in Europe, I see China’s Huawei phones all the time. Frankly, they look a generation ahead of Apple’s. They are slicker, have better specs and use brighter screens than my iPhone.

I could buy one today. But between my computers and Apple TV, the cost of switching out of the Apple ecosystem is just too high.

Like the Hotel California, you can check out of Apple anytime you want. But you can never leave.

Third, the rise of passive investing ensures an almost endless demand for Apple stock.

That’s because most benchmarks are weighted according to market capitalization. As long as flows into passive funds continue at the current torrential rate, there will always be buyers for Apple stock.

The Outlook for Apple in 2020

I can’t predict the future. But I can say with confidence that Apple won’t soar another 86% in 2020. (That would give Apple a market cap of $2.4 trillion.)

At the same time, Apple won’t go the way of BlackBerry… and will be around for a long time.

Still, the year after such a huge run is not the time to bet big on Apple stock.

Good investing,

Nicholas

Interested in hearing more from Nicholas? Follow @NickVardy on Twitter.

The post Should You Take Another Bite of Apple? appeared first on Investment U.

Warren Buffett had a rough 2019.

Yes, the greatest investor in history closed the year up by 11%. But that performance trailed the S&P 500’s 30% rise in 2019 by 19%.

And that marked Buffett’s worst performance relative to the S&P 500 in a decade.

I’ve written before that Buffett has underperformed the S&P 500 for 15 years straight.

It seems that the combination of Berkshire’s size and Buffett’s infamous aversion to technology stocks – except for Apple (Nasdaq: AAPL) – has caught up with him.

Yet, as a contrarian at heart, I want to play devil’s advocate today with my own views.

What if I’ve been wrong about Buffett?

Could it be that after this decade and a half of trailing the market, now is precisely the time to be bullish on Berkshire Hathaway (NYSE: BRK-A)?

The Market’s Current State of Play

Every few decades or so, financial markets go crazy.

You saw this with the Nifty Fifty technology stocks of the 1960s.

You saw this in the dot-com boom of the 1990s.

As I write this, the CNN Fear & Greed Index – my favorite measure of market sentiment – stands at a whopping 97 out of 100.

Although I would not classify today’s market as a mania that rivals the dot-com bubble of 1999… I do see some compelling parallels.

First, the top technology companies now account for as much of the S&P 500 as they did at the height of the dot-com boom in 1999.

Today’s stars are the FAANG stocks – Facebook (Nasdaq: FB), Apple, Amazon (Nasdaq: AMZN), Netflix (Nasdaq: NFLX), and Google parent Alphabet Inc. (Nasdaq: GOOGL).

Twenty years ago, it was the “four horsemen” of technology – Intel (Nasdaq: INTC), Cisco (Nasdaq: CSCO), Microsoft (Nasdaq: MSFT) and Dell (NYSE: DELL). These were joined by the “new horsemen” of the internet, Oracle (NYSE: ORCL), Sun Microsystems, EMC and JDS Uniphase.

In 2020, just five of these technology companies – Intel, Cisco, Microsoft, Dell and Oracle – still trade on public markets. Other high-profile names like CMGI and WorldCom are also long dead and gone.

Are Uber (NYSE: UBER), Lyft (Nasdaq: LYFT) and Tesla (Nasdaq: TSLA) today’s answer to those spectacular but now long forgotten boom-and-bust stories?

As Mark Twain is often reputed to have said, “History doesn’t repeat itself, but it rhymes.”

A Bullish Case for Berkshire

No. 1: Negative Sentiment Toward Berkshire

Regular readers know that I am a big fan of market sentiment.

And with Berkshire lagging the market for the past decade and a half, the sentiment toward it is as negative as it’s been in recent memory.

This negativity is nothing new.

During the dot-com boom, tech bulls dismissed Buffett as out of touch with the markets. Buffett was unable to grasp how technology stocks meant that “this time it’s different.”

On December 27, 1999, Barron’s published a piece titled “What’s Wrong, Warren?” which suggested “Warren Buffett may be losing his magic touch.”

Less than three months later, the Nasdaq crashed.

And Berkshire’s performance came roaring back.

No. 2: Strategies Revert to the Mean

Buffett’s investment partner Charlie Munger has spoken a lot about the importance of mental models. I have written about some of these mental models as well.

According to Munger, one of the most important mental models for financial markets is “reversion to the mean.”

Put simply, the more extreme a move in the price, the more extreme the snapback.

You saw this in the valuation of the Japanese stock market in the 1980s.

You saw this with dot-com stocks in the 1990s.

You saw this with Chinese stocks in 2007 when PetroChina became the world’s first trillion-dollar company before plummeting 75%.

History teaches us that out-of-favor investment strategies come back with a vengeance.

The same applied to Berkshire.

Between June 30, 1998, and February 29, 2000, the Nasdaq soared 145%. Meanwhile, Berkshire was down 44% – a shocking 189% streak of underperformance for the Oracle of Omaha.

But in the two years after the bubble burst, Berkshire soared 77%, while the Nasdaq tumbled 62%.

No. 3: Berkshire’s Cash Pile as a Free Option

Berkshire has a lot of cash… $128 billion to be exact.

That’s 23% of its current market cap of $555 billion.

Berkshire has not made what Buffett calls an “elephant-sized acquisition” for four years.

And it’s clear that Buffett is waiting for the opportunity to put that cash to work.

This cash pile is Buffett’s underappreciated edge.

A big cash pile allowed Berkshire to cut sweetheart deals with the likes of Goldman Sachs (NYSE: GS) and Bank of America (NYSE: BAC) after the global financial crisis of 2008. I’ve come to view Berkshire’s cash pile this way.

Yes, Berkshire may underperform the S&P 500 by a small amount.

But its $128 billion is like a free option to purchase cheap assets following an inevitable crash.

The cash limits Berkshire’s downside while also offering it a “black swan” type upside.

Will the Berkshire Tortoise Beat the Market Hare?

Berkshire has trailed the market over the past 15 years. And who knows how long Buffett will remain at the reins.

My biggest takeaway?

If you fear a market crash, Berkshire is the place to be.

And a crash is not a question of if, but when.

Good investing,

Nicholas

Interested in hearing more from Nicholas? Follow @NickVardy on Twitter.

The post Is It Time to Bet Big on Warren Buffett? appeared first on Investment U.

Wall Street is pessimistic on Apple stock (Nasdaq: AAPL), by and large. And there are good reasons to be fearful about the tech stock giant. 

One, of course, is the signature trade war with China instituted by President Trump. But this is hardly a problem unique to Apple.

Many companies, some listed on the Dow Jones, and many components of the S&P 500, are affected by the much-criticized American economic policy.

Apple Stock (Nasdaq AAPL) – Not So Shiny

Meanwhile, the average selling price of the iPhone, Apple’s signature product, may very well see a decline in fiscal year 2020. That’s because consumers are gravitating toward cheaper products, including older, less expensive iPhones and Samsung phones.

The Apple iPhone 11 starts at $50 lower than its predecessor, the Apple X iPhone. And earlier generations of the phone are seeing lower prices than ever.

Consumers are starting to ask themselves what they are truly getting for the premium they pay for the top-of-the-line iPhone – a slightly better camera? It may no longer seem worth its commanding prices.

It’s possible that reduced prices could yield higher iPhone sales overall. But this is not guaranteed as the market for the product lurches on in a slowing economy.

Should you buy Apple stock right now? That, of course, depends upon who you ask.

For example, Jefferies analyst Kyle McNealy argues that the iPhone will do better than expected in 2020. This is due in large part to its new 5G capabilities.

McNealy gave the stock a “Buy” rating with a price target of $260.

And the iPhone 11, the Pro and the Pro Max models of the phone are flashing signals of strong sales.

Apple has also stated that its Apple TV+ subscription video service is going to be priced at $4.99 per month. Even better, the service will be free for a year for new Apple customers.

So there are some – at least superficial – reasons to find optimism with Apple.

But here’s a bigger reason why you shouldn’t.

Apple Has Lost Its Innovative Edge

I’m going to switch gears for a moment and tell you a story about a conversation I had the other day.

A colleague of mine asked me about a small, thin white device on my desk.

I shouted back with glee that it was an iPod Touch, like a proud father showing off his son’s football trophy.

He looked at me funny. It didn’t register. Then a look of vague recognition came over his face. Sure, he had heard of iPods and iPod Touches before.

He just hadn’t seen one in awhile. A long while.

The iPod, especially my favorite, the iPod Classic, once represented everything unique and innovative about the spirit of Apple.

Its software counterpart, iTunes, revolutionized the music industry. You could now buy virtually any song on demand for the low price of $0.99 each.

Plus, with the iPod, you could take all of your music with you. Anywhere.

It was a total game changer. And it most likely saved the entire music industry from the brink of an apocalypse that had been set off by pirating companies like Napster and LimeWire.

Today, the iPod is a dinosaur. And its iconic product sibling, the iPhone, is commanding lower prices than before, despite having once revolutionized the mobile industry the way iTunes and the iPod did with music.

Where Is Apple’s Innovation Mojo?

You see, Apple has a problem, and it isn’t trade wars with China or disruption in Hong Kong or even a U.S. recession.

Apple has an innovation problem. And it’s had one for a while.

Greg Petro of Forbes titled his piece from June 7 “At Its Core, Apple Is No Longer Innovative.”

Petro writes: 

The truth of the matter is that at its core, Apple’s woes go far beyond their ability to sell their flagship smartphones. The company’s challenges surround one simple fact: Apple is not innovative anymore across any category. Apple is failing to bring anything new to the table in smartphones, apps, smart devices or even their retail stores. And until they find a way to do so, we will continue to watch this company unravel.

Apple products in the Steve Jobs era were never beloved for their bargain-basement prices, because they were not bargains. They were expensive.

Apple was loved because of its brand culture of innovation, its adventurous spirit. Its willingness to take humdrum products like phones and music players to soaring new heights.

That adventurous spirit has been sorely lacking in the Tim Cook years, and it’s becoming a major problem for the company.

I’m not saying you should give up on Apple or that it’s not a “Buy” right now. 

I look at the iPod Touch on my desk with a slightly nostalgic expression mixed with painful worry. 

If you are considering buying Apple stock do your diligence and just be cautious.

Apple Company Profile

Apple, a Cupertino, California, company, is one of the most successful firms in the world. It’s core business is the design, manufacturing and marketing of personal computers like the famous MacBook, mobile phones like the iPhone X and media products such as iTunes.

In 2018, Apple did $265 billion in sales for a net income of $59 billion. The balance sheet reported $365 billion in total assets and $258 billion in liabilities. Here is some more of Apple stock by the numbers:

Apple

Sector: Technology
Industry: Consumer Electronics
CEO: Tim Cook

Revenue: $259.03 Billion
Net Income: $55.69B
Diluted EPS: $11.78

– Brian M. Reiser

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It reminded me of a valuable economic lesson.

Several years ago, I was invited to lunch with Robert Novak (the infamously well-connected reporter who released the name of CIA agent Valerie Plame) and John McCain. It was an incredible conversation.

I walked away with two highlights. McCain told us he definitely wasn’t interested in the White House. (The poor choices he made during his subsequent presidential campaign confirmed his lack of interest.) More importantly, though, the famed veteran led me to a pivotal economic study called “Economic Organisation of a P.O.W. Camp.” It was written by Robert Radford in 1945.

As a former prisoner, Radford tells a fascinating tale… one that oddly mirrors our modern economy.

His essay weaves an incredible tale of how economies work. But what stands out most – and what is truly valuable for today’s investors – is his commentary on the camp’s “currency.”

In Radford’s camp, cigarettes were currency. Despite no shortage of actual German money, his fellow prisoners traded cigarettes. They used the enemy’s money only to pay off their gambling debts.

But the prisoners had no way to control the supply of their cigarettes. They couldn’t grow tobacco and they certainly weren’t allowed to go outside the prison to buy more.

They were entirely dependent on regular provisions from the Red Cross – a prison camp’s version of a central bank.

This fact led to huge swings in the supply of cigarettes.

Or, more aptly, it led to huge swings in the monetary supply – not unlike what we’re seeing across the world today.

For the prisoners, deflation was a major concern.

Due to the conditions of war, the Red Cross was often not able to deliver fresh cigarettes to the prison. When the supply was interrupted, the amount of money flowing through the camp literally went up in smoke. Add in a couple of nerve-wracking air raids nearby, and the supply plummeted.

Prisoners stashed the few cigarettes they could get their hands on.

With less money flowing through the camp’s economy, prices came down. Deflation took hold.

But then something peculiar happened. As the supply of cigarettes dwindled, prisoners pulled some of the tobacco from their machine-made cigarettes and started rolling their own. For a while, the lightweight cigarettes traded at the same price as the full-weight smokes.

But soon, the market caught on. Folks started hoarding the premium cigarettes and trading only the inferior product.

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Something known as Gresham’s law kicked in.

The law is simple… bad money drives out good money.

Very soon, it was virtually impossible to find the premium machine-rolled cigarettes within the camp. They were all stashed away, while the cheaper hand-rolled cigarettes were openly traded.

This idea teaches us that if two currencies have the same nominal value, but one is truly more valuable, the weaker currency will be traded, while the premium currency will be hoarded.

We’ve seen this with collectible coins. Coins with the same face value may trade for vastly different prices because of the metals contained within them.

But I argue Gresham’s law is now showing up across the globe in a different form.

The idea of good and bad money is taking a different shape. It’s not Gresham’s law in its truest form, but the underlying principal is the same. Artificial manipulation is creating waves in the economy.

It’s critical that investors are able to spot it.

The first example that comes to mind is America’s overzealous tax on foreign profits. To a company like Apple (Nasdaq: AAPL), money earned overseas is worth less than money earned at home because America’s electronics icon is forced to give Uncle Sam 35% of its foreign income.

Sticking with our cigarette theme, it’s like Apple earns a full cigarette… but gets only 65% of it when it brings it home.

The fact forces Apple to not repatriate its cash. Instead, the company hoards it… building a stash that’s now worth more than $150 billion in foreign cash.

That’s a lot of cigarettes.

Another recent example is the situation in Greece. The idea of switching back to the drachma or creating a new currency was virtually tossed off the table thanks to Gresham’s law. With so many euros already in the Greek economy, there was nothing to keep citizens from hoarding euros and spending the new currency… forcing its value even lower against the euro.

It would have stirred incredible headwinds for the already weak economy.

Our point here is not to lecture on Gresham’s law. It’s a complex idea with many variables. Instead, we want readers to understand that the essential laws of the economy are always in force… no matter the size or scope of the economy.

Whether it’s the eurozone or a prison camp, the rules are the same.

In other words, despite strong-arm tactics, it’s impossible to bend the rules of the economy. Understand them and you’ll make money. Break the rules and you’ll certainly be punished.

If you’re looking for a hero, read Radford’s pivotal work.

Good investing,

Andrew

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