Apple Inc. has solidified its position as a transformative investment for long-term shareholders, boasting notable success in both market capitalization and growth. The tech giant has more than doubled its share price over the past five years, achieving an average annual growth rate of 16% and adding approximately $2 trillion to its market cap. With a valuation of around $3.88 trillion, market analysts have been evaluating whether investing in Apple at this stage is essential, considering its past performance.
Critics argue that the most compelling reason against buying Apple stock isn’t a lack of future growth potential, but rather the wealth of indirect exposure many investors may already have. Apple reported revenue of $435 billion in the last 12 months, positioning it among the top 40 global economies if its sales were compared to national gross domestic product figures. The company also achieved net income nearing $118 billion, fueled by impressive operational efficiency that allowed it to improve its net margin from less than 21% five years ago to over 27% currently.
In the same timeframe, Apple generated free cash flow exceeding $123 billion, with nearly $92 billion allocated to share repurchases. The ongoing buyback strategy has reduced the number of outstanding shares by 25% since 2018, benefiting remaining shareholders.
Apple’s cash reserves and short-term investments remain substantial, totaling about $67 billion. The company is not resting on its laurels; ambitious growth plans are underway. CEO Tim Cook recently highlighted record-breaking sales in the iPhone franchise and continuous innovation in services, including the Apple Intelligence and improvements across platforms such as streaming video, Apple Pay, and the App Store. “I have every confidence that our best work is yet to come,” Cook stated in a recent earnings call.
For investors who are optimistic about Apple’s trajectory, it’s important to recognize the indirect exposure many may already possess through index mutual funds and exchange-traded funds (ETFs). For example, the widely held SPDR S&P 500 ETF has approximately 6% to 7% of its assets tied up in Apple shares. Tech-focused ETFs, like the Vanguard Information Technology ETF, hold over 14% of their assets in the company. Surprising allocations can also be found in ETFs such as the Vanguard Growth ETF, where Apple accounts for up to 12%.
Even broadly diversified funds like the Vanguard Total Stock Market ETF, which contains over 3,500 stocks, have allocated almost 6% of assets to Apple. Thus, potential investors might find that buying Apple stock for individual portfolios isn’t necessary if they are already sufficiently exposed through index and tech-focused funds.
Interestingly, analysis suggests that while Apple remains a robust company with excellent prospects, those considering stock acquisitions should also explore other investment opportunities. In fact, the Motley Fool Stock Advisor has identified ten alternative stocks that they believe offer the potential for even greater returns. Historical recommendations have had significant upside; for example, a $1,000 investment in Netflix when it was recommended in 2004 would have grown to $424,262 by now, and Nvidia’s recommendation in 2005 would have flourished to over $1 million.
Ultimately, while Apple continues to be a strong contender in the tech arena, prospective investors may want to assess their current portfolios before adding more shares of the company, especially considering the breadth of exposure available through existing ETFs and funds.
