Why Apple should currently not be part of the portfolio

Luxemburg, 02. September 2020 - Some market players fear that the telecommunications sector could become a trap regarding added value: Share performance has fallen short of expectations, while earnings forecasts are not very convincing. In fact, the opposite is the case: if we extend the period from three to six months, this sub-sector is likely to be the least affected by downward forecast changes. With a downward adjustment of 4 percent, this sub-sector is already in a better position than other areas of the technology sector. Based on these low expectations, no more surprises are required to generate outperformance. Telecommunications stocks also offer significant catch-up potential due to their strong business models. In the future, they are likely to be valued not at an average price/earnings ratio of ten, but rather over 25.

The Software & Services sector, on the other hand, is clearly too expensive, with sometimes rather adventurous price-earnings ratios. If stock options are considered as part of executive compensation, they are often between 60 and 100, which suggests a significant underweighting of this sub-sector. After the sharp rise in share prices in recent months, there is a lot of turbulence on the market - which cannot pen out well in the long term. Apple is an example of a stock that investors do not need to have in their portfolio at that point. The stock has risen by more than 70 percent this year, while the forecasts for earnings per share have only been raised by one percent. The operational result is at the same level as in 2015.

Additional growth in the App-Business is rather unlikely, because it had already been the perfect storm against the background of the Corona crisis. At the same time, the 5 G replacement cycle is overvalued against the background of a market characterized by a high degree of saturation. Last but not least, Apple is very much affected by the Chinese-American trade war. Despite the lack of fundamental value creation, the Apple share is priced with a price-earnings ratio of 33 based on the profits forecast for the coming year.

In order to play the big tech game, investors do not have to get invested in stocks that make the headlines and are correspondingly highly rated. One example is the South Korean smartphone supplier Samsung, which is trading with a cash-adjusted price-earnings ratio of 10 with growth of 5 percent.