We recently published a list of Couch Potato Stock Portfolio: 7 Best Stocks To Invest In. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other best stocks to invest in from Couch Potato portfolio.
Couch Potato investing is the concept of having a portfolio of assets that operate almost entirely on autopilot. This portfolio is intended to withstand shifting market circumstances without needing investors to make major modifications to their asset allocation or objectives. In 1991, Scott Burns came up with the idea, seeking to construct the simplest investment strategy possible: a 50/50 combination of equities and bonds using only two funds. Burns claims that this makes it possibly the most accessible portfolio available, stating that anyone who “can divide by 2” can understand it.
Barclays calculated the weighted average returns of hedge fund portfolios by investor type, which ranged from 10% to 11%. Based on performance, a conventional 60/40 portfolio model would have comfortably outperformed these gains. According to the Lazy Portfolio ETF, a 60% stock/40% bond strategy incorporating the Vanguard Total Stock Market ETF and the Total Bond Market Index Fund would have returned little less than 15% in 2024. Even after 5 years, including 2022, when both stocks and bonds fell in value, the 60/40 method has an average return of 8%. In essence, couch potato investing is a more conservative version of the 60/40 method. More importantly, its dependability shines through in difficult circumstances. For example, between 2000 and 2002, the S&P 500 sank 43.1%, whereas the couch potato portfolio declined just 6.3%.
Unsurprisingly, one possible downside of the couch potato portfolio is that it tends to underperform during notable market upswings. Portfolios with a larger allocation to equities can better capitalize on bullish markets, resulting in higher returns than the more conservative couch potato strategy. This disparity is especially prominent when the proportion of shares in a portfolio exceeds the couch potato approach’s balanced 50/50 mix of stocks and bonds. However, Burns recommends that investors evaluate this strategy comprehensively.
“Your 35-year portfolio, for instance, was worth $884,481 at the end of 2021 and declined $155,601 during 2022. That’s a loss greater than the original $100,000 value.
But so what? The portfolio is way larger than expected or needed.
The good news here is that the historical evidence shows, once again, that we can get through some pretty hard times if we keep our investments simple and cheap.”
Our Methodology
Although couch potato investing discourages individual stock trading in favor of index investment, we chose to examine the Vanguard Total Stock Market ETF and identified some of its best holdings for this list. These equities were then filtered down further based on many parameters, including the hedge fund sentiment around them, a history of stable dividend payments, and well-established businesses.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is a technology powerhouse best known for its main products, the iPhone, Mac, and Apple Watch, as well as its diverse range of services, which includes iCloud and Apple Music.
According to Morgan Stanley, Apple Inc.’s (NASDAQ:AAPL) latest AI program, Apple Intelligence, appears to have boosted iPhone demand in the United States somewhat during the December quarter. Looking ahead, Morgan Stanley expects iPhone demand in emerging nations other than China to remain robust, with India leading the way.
On February 4, JPMorgan restated an Overweight rating and a $270 price target for Apple Inc. (NASDAQ:AAPL). The firm’s assessment was based on Sensor Tower data, which showed that Apple’s App Store sales climbed by 2.7% month-over-month in January, above the historical average growth rate of 2.3% from December to January.
Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.
The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.
Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.
Apple’s financial footing remains exceptional, with approximately $50 billion in net cash and marketable securities. Looking ahead, we expect earnings-per-share growth to outpace revenue growth, driven by margin expansion and continued share buybacks.”
Overall, AAPL ranks 2nd on our list of best stocks to invest in from Couch Potato portfolio. While we acknowledge the potential of AAPL, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
