If you’re on edge of your seat waiting to get your hands on Apple‘s (NASDAQ:AAPL) new iPhone 13, you’re probably not alone. In the past, product launches from Apple came with high anticipation and long lines.
But as appealing and innovative as Apple’s products may be, there’s something else that the company is known to deliver: profits. The company enjoyed a wildly impressive year in 2020 despite the pandemic. The new iPhone may add another boost to the company’s profitability metrics, and you can get a bite of the rewards by becoming an investor.
This is a great chance to consider Apple’s stock while you wait on the release of the new iPhone 13. Here are a few items to think about before you dive in.
Image source: Getty Images.
Become a student of the company
Apple is no stranger to households around the world, but that doesn’t mean you should just jump in and invest. Go beyond the media and dig into the numbers, management team, and growth opportunities before making an investment decision.
To get started, think about what Apple symbolizes around the world. In 2018, Apple made history by becoming the first company in the U.S. to reach $1 trillion in market capitalization. Two years later, Apple won the race to $2 trillion in market capitalization. This number is a big deal in the stock market, although it doesn’t reveal future growth prospects. Market capitalization represents how much a company is worth, multiplying the current price of one share by the total number of a company’s outstanding shares.
When you’re ready, start doing a bit of qualitative and quantitative analysis. Consider the people in the company and their management style. Do you think Apple’s CEO Tim Cook has what it take to help the company reach another market milestone? What is the company’s competitive advantage? Then, get a taste of the company’s money journey by reviewing the financial statements. You’ll discover how much cash and debt a company has as well as revenue growth and profitability.
Lean on Buffett for a bit of stock market wisdom
Warren Buffett, CEO of Berkshire Hathaway, isn’t generally a fan of tech stocks, but he doesn’t shy away from professing his love for Apple. In fact, Apple is the largest stock holding in his company’s portfolio.
Although Buffett is considered to be the most successful stock investor of our time, that doesn’t mean you should automatically add Apple’s stock to your portfolio. However, it wouldn’t hurt to heed his advice and strategies for considering if a stock is right for your portfolio.
Buffett is known for saying, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” Determining if the stock has growth potential can help you achieve your portfolio goals over the long run.
The Oracle of Omaha also recommends that investors never invest in a business they can’t understand. If you do your homework and still can’t understand the mechanics of the business, you might not want to invest in it.
Add a bit of diversification to your portfolio
Apple is quite an anomaly in the investing world. The tech giant has offered rapid stock growth in the past plus dividend income. If Apple keeps increasing its dividend payout every year, the company has the potential to be added to an elite list of companies that have increased their annual dividend for 25 consecutive years.
This makes Apple a great company to have in your portfolio if you are seeking diversification. After the company’s 4-for-1 stock split, Apple’s stock is a lot more affordable to investors. But if you don’t have enough to buy an entire share, you can also buy fractional shares and slowly increase your position in Apple stock over time. That way, you can safely add Apple to your portfolio without being greatly impacted by swings in the stock price.
Enjoy a lifetime of benefits
Let’s face it: The iPhone 13 may not be in style forever, but it will serve its purpose for the time being. However, an investment in Apple stock will keep paying off for years to come, as long as the company continues to grow.
Buying company stocks may not be as appealing as purchasing the latest gadgets, but it will give you a unique opportunity to profit from a company that you are passionate about. Before diving in and making a decision overnight, do your due diligence and make sure the stock is the right match for you and your overall portfolio goals. If Apple is deemed a winner for your portfolio, you may walk away with two prizes this year: a new iPhone and dividends!
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
