5 Best Stocks To Buy According To 4 Billionaire Quants

2. Apple Inc (AAPL)

Apple Inc (NASDAQ:AAPL) is one of the most popular stocks among hedge funds for a long time.  Personally I am not a huge fan of the stock and explained why I don’t like the stock as a long-term investment on CNBC 3 months ago. However, quant hedge funds and several high profile investors such as Carl Icahn and David Einhorn love this stock. AQR Capital had nearly $1 billion invested in the stock. D.E. Shaw followed AQR with a $365 million position. RenTech and Two Sigma had $215 million and $31 million respectively in the stock. Carl Icahn said in May that Apple is worth $240. Here is what he said:

“After reflecting upon Apple’s tremendous success, we now believe Apple shares are worth $240 today.  Apple is poised to enter and in our view dominate two new categories (the television next year and the automobile by 2020) with a combined addressable market of $2.2 trillion, a view investors don’t appear to factor into their valuation at all.  We believe this may lead to a de facto short squeeze, as underweight actively managed mutual funds and hedge funds correct their misguided positions.  To arrive at the value of $240 per share, we forecast FY2016 EPS of $12.00 (excluding net interest income), apply a P/E multiple of 18x, and then add $24.44 of net cash per share.

…Considering our forecast for 30% EPS growth in FY 2017 and our belief Apple will soon enter two new markets (Television and the Automobile) with a combined addressable market size of $2.2 trillion, we think a multiple of 18x is a very conservative premium to that of the overall market.

…While our forecast for FY 2016 EPS is significantly above Wall Street consensus today, in October 2014 so was our original forecast for FY 2015 EPS, which is now in line with the Wall Street consensus. We are optimistic that ecosystem improvements (Apple Watch, Apple Pay, Homekit and Healthkit in particular) will drive modest growth in iPhone revenues next year, despite the difficult comparison that will result from iPhone’s tremendous performance this year”

David Einhorn said the following about Apple in his first quarter investor letter:

“AAPL shares advanced 13%, as the iPhone 6 has proved to be a blockbuster that drove the company to 30% revenue growth and 48% EPS growth in the December quarter. AAPL also announced the April launch of the Apple Watch, its first new product category in five years. While we have modest expectations for Apple Watch and don’t expect AAPL to maintain this level of growth, the market expects even less, as it continues to value AAPL shares at a discounted valuation. We believe that AAPL is a superior company that merits a premium multiple.”

Apple shares returned 2.9% since the end of last year, however, the stock declined nearly 15% since July 20th.