How to Find the Next Apple
Apple's incredible milestone... Your biggest enemy as an investor: fear... How to find the next Apple... The WMO is next week...
Apple (AAPL) hit $1 trillion this week...
Think about that for a minute. A single private enterprise is now worth more than $1 trillion. That's astounding. Mind-blowing.
Keep in mind, only the world's top 15 or so economies have an annual gross domestic product (GDP) that's bigger than $1 trillion. Mexico, for example – a country covering an area three times the size of Texas with more than 120 million people – generates about $1 trillion in GDP per year.
What an amazing accomplishment for the people who built Apple, for the people who invested in Apple, for our country, and for capitalism!
To create that much wealth, Apple had to provide its customers with far more value.
After all, in capitalism entrepreneurs have to persuade consumers to freely enter into win-win exchanges. Apple had to offer products that were overwhelmingly more attractive than their competitors. And it had to continue to do this with each new generation of its products, again and again and again.
Doing so meant that consumers had access to continually improving products, which increased their utility and their productivity massively over time. Changes like this didn't only create value for Apple and its shareholders... It created value for our entire economy.
Just think about how Apple's first iMac led millions of consumers to use the Internet (and Amazon.com). Just think about how Apple's iPod and online music store created the first large, scale (and legal) online music business. Just think about how the iPad led millions and millions of people around the world to start thinking about TV shows and movies as something you stream on Netflix instead of something you watch on TV.
So, yes... investors in Apple and many of Apple's top executives have been rewarded with tremendous amounts of wealth through our capitalist system.
But what the socialists never seem to recognize is how much wealth Apple had to create for others first. That's the miracle of capitalism. And that's why we should all celebrate Apple's success.
I'm sure many of our Extreme Value subscribers are celebrating...
Dan Ferris recommended buying shares of Apple in June 2013 – about five years ago. Back then Dan described Apple this way:
It's easily the cheapest World Dominator we've ever recommended in these pages... I've never seen a World Dominator this cheap. It must be the most misunderstood business in the world today.
Dan very astutely noticed that Apple's shares were way off their highs (down about 35% from its previous peak) as Wall Street worried over the very large amounts of money Apple was investing in new capital projects. Apple's capital spending had soared from around $1 billion a year in 2008 to more than $10 billion in 2012.
Meanwhile, Dan simply noted that the company's track record of building great new products was unassailable, and that the company was trading at nine times free cash flow. That is, the entire business was only worth about nine years of the cash it was producing currently. There was no doubt in Dan's mind that Apple's stock would soar as it continued to grow sales, earnings, and cash flows.
Apple is the cheapest World Dominator around, by any measure. It's filet mignon at Big Mac prices. And it's growing faster than all the others. So I expect you'll earn a higher return buying Apple today than most other stocks in the market.
I'd like to publicly congratulate Dan Ferris for making such a great recommendation...
I know if you've followed his advice, you're thrilled. But I'd also like to point out something that I suspect applies to far more of our subscribers.
I bet very few of you have bought shares of Apple, either on Dan's recommendation or simply because you recognized it has a great, highly capital efficient business with a world-class brand.
And just think about that for a minute.
Apple has been widely known as a great investment for a long, long time. Remember the movie Forrest Gump? Even the mentally handicapped Forrest Gump knew that owning Apple was a smart financial decision. That movie is now almost 25 years old. Apple has been a "no brainer" investment choice for a long time.
But, the chances are, you didn't buy it. Why not? I'm asking sincerely.
And it's not just Apple's stock...
The odds are you haven't bought any of the big, very obvious, great investments we've recommended over the last two years. There have been many, similar stories:
- You probably didn't buy Alphabet (GOOGL) – better known as Google – when Dr. David "Doc" Eifrig recommended it in December 2016. The company is the clear leader in online advertising and online searches, and it is developing a wide range of cutting-edge new technologies, including artificial intelligence. This probably is the most important company in the entire world. And you probably don't own it. It's up 52% since we recommended it.
- You probably didn't buy Amazon (AMZN), either. We've recommended it several times over the years (originally in 1999!). Most recently, Doc urged you to buy it in May 2017. Hopefully I don't need to explain why Amazon is one of the biggest, fastest-growing, and important companies in the world. It's up almost 100% since our most recent recommendation.
- You probably didn't buy chipmaker Nvidia (NVDA) when David Lashmet recommended it in May 2016. The company is the obvious leader in video graphics chips, which have leading applications in video games (booming) and self-driving autos (emerging). The stock is up more than 450% since.
- Another, obvious emerging giant? How about Grubhub (GRUB). The company provides the technology and the logistics for ordering food online. If you've tried it, you love it. We recommended it in my Stansberry's Investment Advisory newsletter in October. It has more than doubled since (up 146%).
- Or... what about the most obvious investment I think I've ever covered, Facebook (FB)? I explained in my December 2016 recommendation that Facebook had generated more cash profits in its first 10 years of operations than any other business in the history of capitalism... and that it would continue to grow rapidly for at least another decade. Since then, the stock is still up by more than 50%, despite its tremendous pullback last week.
If you haven't bought these recommendations, if you don't invest in these dominant companies... why not?
Again, I'm asking sincerely. I'd truly like to know if you've missed these opportunities. Tell me what's kept you from making these investments first, above all others: feedback@stansberryresearch.com.
These are the kind of recommendations, along with our other ultra-high quality and capital-efficient recommendations (like property and casualty insurance companies), you should build your portfolio around. These investments will produce stupendous amounts of wealth if you'll simply hold onto them over reasonable periods of time.
So, why haven't you made these investments...? Again, I sincerely want to know.
Please, drop me a note and let me know what kept you from making these winning investments: feedback@stansberryresearch.com.
I'd bet that, in most cases, the real reason subscribers haven't made these investments is because of fear...
A lot of our subscribers allow their concerns about our country's debt load, our political situation, the China trade dispute, and so on, to keep them completely out of the market.
And yes, we share these concerns and we try to address them with hedges and risk-mitigation. But avoiding making investments altogether? That's obviously not our advice.
"But, Porter... What if the market turns down? What if the looming debt crisis causes a bear market, right now? What if these companies miss earnings and get crushed?"
Those bad things will, of course, happen from time to time.
But the thing to remember is that the gains you'll make on these kinds of super-high-quality businesses will dwarf those losses over time. In fact, the gains will be so big that you'll simply completely forget episodes like last week's big pullback in Facebook. In a year or two, you'll never even remember that it happened.
Please understand... I'm not suggesting you should put half of your portfolio into three or four world-dominating tech names and hold them no matter what...
I believe that reasonable amounts of diversification are very important. And I believe that managing your risk is critical. But if fear has kept you from buying any of the stocks I mentioned above or any of the other giant, obvious opportunities that we've recommended recently – like Disney (DIS), +11%... Microsoft (MSFT), +276%... Ubisoft Entertainment (UBI.PA), +131%... CBRE Group (CBG), +107%... American Express (AXP), +60%... and many others – you must re-examine how your emotions are costing you the ability to generate huge amounts of wealth.
I'm not urging you to buy small, unheard-of, unknown, or hated companies that may (or may not) turn around. I'm urging you not to miss the best and surest bets we make.
All of these names, like Apple, are the undisputed leaders of their space. They are all growing rapidly. They are all incredible businesses – the highest quality in their industries. You cannot allow fear to keep you out of these investments. And, if you have, then you need to consider the bigger risk you face: the risk of not generating any returns with your strategy.
So... what should you buy today?
Out of all the stocks we currently cover, which opportunities are the most like buying Apple back in 2013? What are the big, obvious opportunities you might be missing today?
As I told you three weeks ago, I think that both Disney and Apple are the two best stocks you can buy in the world right now. If you don't own them, buy them. Put up to 5% of your portfolio in each name. Use a wide stop (33%). Let them grow, for years and years.
I also believe that Facebook is an obvious opportunity. Social networking isn't going away. Facebook and its other platforms will dominate the industry for a long, long time. The company's snafus this year are temporary and won't make a difference to its five- to 10-year cash generation. Facebook remains the greatest single business I've ever studied.
I'd also urge you to read Christian Olsen's recent recommendation of Intuitive Surgical (ISRG) in our newest research product, Stansberry Innovations Report. We've recommended the company before (in 2004) and it is the clear leader in surgical robotics, a field that's surely going to continue growing for decades.
Those four names will get you started...
Investing successfully doesn't have to be hard or complicated. If all you do as an investor is focus on the biggest, best, and most dominant companies – like the ones I've discussed here – it's virtually impossible for you not to succeed. Finding the next Apple isn't hard. Apple was an obvious choice. And it still is today.
Our goal here, as always, is to give you the information we'd most want if our roles were reversed. Knowing more about your decision-making process is very important to us, as it helps us figure out what to write and how to help our subscribers the most. So, again, if you haven't bought any of these stocks yet... please take a minute to let me know your thinking. What's keeping you from making these great investments? Send your thoughts to:feedback@stansberryresearch.com.
New 52-week highs (as of 8/2/18): Apple (AAPL), Blackstone Mortgage Trust (BXMT), Nutrien (NTR), and Williams Partners (WPZ).
Good investing
Porter Stansberry
Baltimore, Maryland
August 3, 2018
P.S. Next week is one of my favorite weeks of the year. It's the White Marlin Open (WMO). This is the world's biggest and richest billfish tournament. I'll be competing again this year with the crew of my boat, Two Suns.
There will be more than 400 boats in the contest this year, with more than $5 million in prize money on the line. We've come very close to winning before (we've been to the weigh station five times in three years of competing) and I believe we're going to bring home the trophy this year. If you want to watch, you can watch the evening weigh-ins here: https://whitemarlinopen.com/marlin-cam.