Apple- A Test in Patience


August 10, 2015

A message from our Al Frank Value division.

We believe Apple offers a fine illustration of one of the most important facets of our investment philosophy, patience.

Long-time fans of Apple, we are consistently impressed by the ability of the firm to grow revenue and earnings. In the third fiscal quarter of 2015, the consumer electronics giant earned an adjusted $1.85 per share on $49.6 billion of revenue, $0.04 and $300 million ahead of the estimates, respectively. In the quarter, AAPL sold 47.5 million iPhones, 10.9 million iPads, 4.8 million Mac computers, although the company declined to state how many units of the new Apple Watch were sold.

Ever-positive CEO Tim Cook said, “We’re very hard at work on our exciting pipeline of new hardware, software and services and we’re continuing to expand our global reach into new markets. And we’re passionately committed to leaving the world better than we found it.”

Overall, we were pleased with the quarter and believe the strength of Apple’s product lines leave shares still trading below fair value, especially after the 4% earnings-related share-price pullback. Management continues to chip away at its $200 billion capital return program, having completed $126 billion. AAPL expects $49 billion to $51 billion of revenue next quarter with gross margins between 38.5% and 39.5%.
No matter how much research a company conducts, there will always be some poor selections along with good selections, but over the long term our winners have won far more than our losers have lost!

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Please note that the discussion above refers to our newsletter, The Prudent Speculator, and is not nor is it intended to be representative of any individual product available through AFAM Capital, Inc.

Investment recommendations provided herein are subject to change at any time. Those recommendations provided herein are provided for informational purposes only and are not provided as a recommendation to buy or sell any one security. Past and current recommendations that are profitable are not indicative of future results, which may in fact result in a loss.
Performance and characteristics of AFAM portfolios and securities are subject to risks and uncertainties. The stocks selected for listing and discussion were based on proprietary analytical work performed by AFAM, and not based on performance, meaning that they are chosen irrespective of profits or losses. The securities presented do not represent all of the securities bought, sold or recommended. See our Previously Recommended Stocks PDF for a list of all past specific investment recommendations.

Nothing presented herein is, or is intended to constitute, investment advice, nor sales material, and no investment decision should be made based on any information provided herein. Information provided reflects AFAM Capital, Inc.’s (AFAM’s) views as of a particular time. Such views are subject to change at any point and AFAM shall not be obligated to provide notice of any change. Any securities information regarding holdings, allocations and other characteristics are presented to illustrate examples of the types of investments or allocations that that AFAM may have bought or pursued as of a particular date. It may not be representative of any current or future investments or allocations and nothing should be construed as a recommendation to purchase or sell a particular security or follow any investment strategy or allocation. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. While AFAM has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third party information presented herein.

No guarantee of investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in securities. Past performance is not a guarantee of future performance.

John Buckingham is the Chief Investment Officer of Al Frank Asset Management, a division of AFAM Capital, Inc. AFAM is an Investment Adviser, registered with the SEC, is notice filed in Texas, California and various other states. AFAM is editor of The Prudent Speculator (TPS) newsletter, weekly commentaries and any attendant publications and is the investment advisor to individually managed client accounts and certain mutual funds. Summary prospectuses can be reviewed here . Registration of an investment adviser does not imply any certain level of skill or training.

328-AFAM-8/7/2015

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