Market Doesn’t Appreciate How Cyclical Apple (AAPL) Is: Nishkama Capital Talks about Its Investments

Nishkama Capital is an investment fund founded by Ravee Mehta who previously worked as a Managing Director at Karsch Capital Management LLC. Before that, he worked as an analyst at the George Soros owned Quantum Fund. Ravee Mehta has also written a book on investing – “The Emotionally Intelligent Investor”. Nishkama Capital has given a return of 3% during the third quarter of 2016 and a cumulative return of 9% during the first three quarters of this year. The fund uses a differentiated framework that is often the source of its analytical edge. Ravee thinks that many of his biggest winners have come from looking at a stock very differently than the market. In a letter to investors, Ravee Mehta talked about some of the fund’s holdings.

The smart money sentiment is an important metric that can be used to assess the long-term profitability of a stock. While there are thousands of stocks trading daily on the market, taking a look at what hedge funds think about certain companies can narrow down the search significantly. At Insider Monkey, we track more than 700 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details here).

Ellica / Shutterstock.com

Apple Inc. (NASDAQ:AAPL) is the world’s most valuable technology company with a market value of almost $550 billion. It is also the biggest position of the fund accounting for 9.25% of its total holdings at the end of the third quarter. Ravee Mehta thinks the market under-appreciates how cyclical the company really is. Apple Inc. (NASDAQ:AAPL) has a highly loyal customer base that is on a somewhat predictable replacement cycle. The installed base of iPhone users is still growing at a double digit rate. Apple Inc. (NASDAQ:AAPL) has been caught off guard by the strong demand for the higher-priced iPhone 7+ and may not even have supply to catch up to demand for this model by the end of the year. Warren Buffett’s Berkshire Hathaway is another shareholder of Apple, with ownership of 15.23 million shares as of the end of September.