1. Apple Inc (NASDAQ:AAPL)
Skylands Capital’s Stake Value: $38,054,847
Charles Paquelet owns a $38 million stake in Apple Inc (NASDAQ:AAPL) as of the end of the third quarter. Skylands Capital first bought a stake in Apple Inc (NASDAQ:AAPL) in the last quarter of 2013. Over the years the fund has cut its stake in Apple Inc (NASDAQ:AAPL). In Q3’2023, Skylands Capital decreased its hold in Apple Inc (NASDAQ:AAPL) by 13%.
Polen Focus Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter:
“Apple Inc. (NASDAQ:AAPL) and NVIDIA alone drove over 1,100 basis points of the Russell 1000 Growth Index’s 42% return, so not owning them was a meaningful headwind to our relative return in 2023. While on a total attribution basis, Apple was not a top three detractor to our full-year return, given its extremely large weighting in the Index, we feel it’s worth sharing our thoughts.
The company’s share price appreciated nearly 50% in a year when its revenue declined and earnings per share was relatively flat with the previous year.
For 2024, consensus expectations are for low-single-digit revenue growth and only slightly faster EPS growth. These pedestrian growth rates are not surprising for a company with nearly $400 billion in annual revenue. What is more surprising is that Apple shares trade at nearly 30x forward earnings, a large premium to the market and many faster-growing, competitively advantaged businesses.
While we continue to think Apple is a wonderful business, it is also a slow growing one with risks that we do not see as insignificant. Apple’s entire supply chain is based in China and much of its incremental revenue growth also comes from China, so if there is a U.S.-China issue that makes it more difficult for U.S.-based companies that have access to large amounts of local data to operate in China, Apple’s business would likely face more challenges than many others. In addition, much of Apple’s services growth and margin expansion has come from direct payments from Google to be the default search provider on iOS devices. This practice is currently the subject of a lawsuit between Google and the U.S. Justice Department. If this practice is deemed unlawful, it could take away a large and highly profitable revenue stream from Apple’s already slow growth engine. While we closely cover Apple, we continue to believe we have better investment opportunities. Apple’s current P/E is above our Portfolio’s weighted average, yet its long-term earnings growth rate is likely to be lower than even our slowest growing holding, according to our research.”
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