Apple’s (NASDAQ:AAPL) recent rotten performance has driven many a loyal shareholder away, but investment website Barron’s is putting its faith in the world’s most valuable company in the coming year, too. In its list of ten top stocks to watch out for in 2013, the financial website has placed Apple at the very top.
What is the Apple Forecast for 2013?
“Apple is still going strong, even as the company’s shares have traded down 23 percent, to around $540, from a September peak of $705,” Barron’s wrote in its premium report, according to BGR.
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Apple reached that high mark in intraday trading on the buzz around the launch of the iPhone 5, though its closing high on September 19 was at $702.10. Since then, though, it has tumbled on worries of rivals gaining market share, increasing product component supply problems, and concerns about narrowing margins. Apple shares closed at $533.25 on Friday.
However, the drop does not bother Barron’s. “None of the recent investor concerns — lower margins, supply constraints, management changes, iPad competition, and the iPhone 5 map fiasco — are major,” the report said. “It’s true that Apple’s earnings growth has slowed to a 23 percent rate from more than 100 percent a year ago, but that’s understandable, given the company’s $156 billion in annual sales.”
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The report noted that Apple was currently trading at its lowest price/earnings ratio in five years. “Apple trades for only 11 times projected profit of $49 a share in its current fiscal year, ending in September 2013,” the report said. “Strip out Apple’s huge cash holding of $128 a share, and the effective P/E is just eight.”
However, even after implementing a dividend and a share-buyback program, Apple should build cash at a rate of $40 billion annually, the report estimated. That would mean that there was “room for a higher dividend and a more aggressive share-repurchase program in 2013. Both could play well with investors.”
Such a move usually leads to increased buying and growth in a stock’s price.
Other stocks on the list include Barnes & Noble (NYSE:BKS), BlackRock (NYSE:BLK), Marathon Petroleum (NYSE:MPC), Novartis (NYSE:NVS), Royal Dutch (NYSE:RDS), and Western Digital (NASDAQ:WDC). Barron’s top stock list last year yielded a 17 percent return, beating the S&P500’s s 12.6 percent growth, BGR said.
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