If I Could Only Buy 1 Stock What Would It Be? Putting constraints on your stock trading strategy can sometimes help clarify what’s truly important in long-term investing success, as imagining various theoretical scenarios can be an excellent aid in gaining a more sophisticated understanding of how share prices rise and fall.
Indeed, one hypothetical scenario could be this: If you were only able to buy one stock for the rest of your life, what kind of stock would it be?
To begin with, you would definitely want to invest in a profitable company, one that’s guaranteed to go on performing well into the future. You might also look for a business with a good dividend too, as that could provide some extra income security as time goes by.
Furthermore, you’d probably prefer to buy a stock you’re familiar with, as well as one that has a great management team and a compelling market advantage.
Fortunately, there’s one such company that matches all those criteria – and that company is Tim Cook’s Apple.
In fact, the corporation is a superb pick for long-term investors right now; its products are incredibly popular, and the brand is one of the most recognizable in the world. Moreover, Apple boasts an impressive gross profit margin of 43%, meaning the company should keep on generating cash for many years to come.
But if you’re still not convinced about the proposition just yet, maybe an endorsement by the Oracle of Omaha will do the trick. Apple represents Warren Buffett’s single largest position, accounting for a full 40.8% of Berkshire Hathaway’s entire portfolio.
So let’s take a closer look, and see why Apple would make a prized addition to your own investment fund.
Source: Unsplash
Apple Is Still The King Of Tech
As one of the foremost manufacturers of productivity hardware in the world, Apple has been at the coalface of personal computer development since the 1970s and continues to lead the way in innovation with its line of MacBooks, iMacs, and iPads.
In fact, Apple’s commitment to design and user experience is what sets its products apart. It has made the company a favorite among creative professionals and general consumers alike, and, with new products such as the Apple Watch and HomePod, it’s clear that the business is still at the forefront of today’s technology and design revolution.
In addition to its hardware devices, Apple’s Services business is also a major player in the sector, with some of the highest usage statistics of any company.
For instance, with over 3.59 million apps available for download, the Apple App Store is the second-largest digital application marketplace in the world. The firm’s Apple Music platform is also beginning to challenge the music streaming space again, with only Spotify beating it in terms of subscribers in 2021.
Apple iCloud is also hugely popular with customers too. The service allows users to automatically back up their iOS devices, making it easy to keep all of their important data safe and secure. Furthermore, iCloud provides a way to access data from anywhere, on any device, and is extremely valuable for busy people who need to work remotely and on the go.
What’s most crucial, however, is the fact that Apple Services is also contributing to the company’s top-line growth as well. The firm “set a June quarter revenue record” of $83.0 billion in 2022, driven in large part by the strong showing of its subscription products wing.
Apple Is A Cash Flow Monster
While many investors tend to focus on revenue when assessing the financial state of a company, it’s often cash flow that’s the real lifeblood of any business. That’s because cash flow is a measure of the actual money coming in and out of a venture, while revenue only measures sales.
In fact, it’s also one of the few metrics that can give an insight into a company’s operational health. For example, if a company has a strong cash flow but weak profitability, that may be indicative of inefficient operations. Conversely, if a company has strong profitability but a weak cash flow, that may be a sign of poor managerial decision-making.
In Apple’s case, however, it’s even more important to consider cash flow because, as a cutting-edge technology enterprise, the company has to continuously reinvest in Research and Development (R&D) in order to maintain its competitive advantage.
For instance, Apple plowed back $21.9 billion into its R&D efforts in 2021, an increase of 17% – or $3.16 billion – on what it invested in 2020.
It’s a good job then that Apple’s cash position is so robust. At the end of the most recent third quarter, Apple had a cash flow from operating activities for the last nine months of $98.0 billion, implying an annual run rate of around $131 billion.
On top of that, Apple also had a trailing twelve-month (TTM) return on total assets of 29.6% – a figure that suggests the firm’s management is using the company’s resources in a particularly efficient manner. This is a stark and welcoming contrast with the broader IT sector return of just 2.62%.
The Future’s Looking Good
Apple’s device offerings are certain to continue to be the best-in-class, and there’s no reason to believe its proven track record of innovation will fail anytime soon. The company’s Services division can expect to remain highly profitable, as it builds on the strong foundation of products and platforms such as the App Store, iCloud and Apple TV.
That said, there are still a few potential areas of growth that Apple could exploit, including the increasingly important augmented reality market. The company has already made headway in this department, providing a selection of tools and resources for AR developers to utilize, such as its ARKit and RealityKit applications.
Apple also offers investors a rather enticing dividend payment that performs well on several different fronts.
For instance, the distribution is well-covered with a TTM payout ratio of only 14.7%, and Apple’s been paying the dividend consistently since 2012. Yes, the yield is low at 0.61%, but this is compensated by the dividend having grown at a 10-year compound annual growth rate of 25.3%.
What’s more, Apple has increased its payout every year for the last decade, which, if that continues, will generate a high return for shareholders over the long haul.
Conclusion
Apple has long been a favorite of many retail and institutional investors. The company consistently produces high-quality products that are both stylish and functional, and its customer service is legendary.
And if you could only ever buy one more stock from here on out, then Apple is surely the one.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.