Don't Be a Contrarian With This Super-Loved Stock

Worldwide Invest Better Day 9/25/2012
Worldwide Invest Better Day 9/25/2012

The iPhone 5 launch on Wednesday, Sept. 12, is sure to be the most important event for tech investors this year. The Motley Fool will be hosting a live chat where our top tech analysts will answer your questions and break down what the announcement means for Apple and tech investors everywhere. Be sure to swing by at 12:45 p.m. ET this Wednesday for all your coverage of Apple's next big announcement.

Our goal here at the Motley Fool is to help the world invest. Better.

In that spirit, we've devoted a large portion of our time this September to letting the world know what it means to invest. Financial literacy isn't one of our country's strong suits, and we'd like to do what we can to change that.

In that spirit, I'll be spending this week and next revealing three of The Motley Fool's most oft-recommended stocks among our premium services, and three stocks our analysts think you should be wary of.

So far, I've let you know about one hidden stock our analysts love, and one well-known company they think you should be wary of. Today, I'm going to show why, sometimes, there's absolutely nothing wrong with following the pack.

The most successful company of our time
If I were to ask you what the most successful company of the past 20 years has been, what would your answer be?

My guess is that well over half of you would say Apple (NAS: AAPL) , and I'd have to agree wholeheartedly. The company went from nearly bankrupt in the late 1990s to the most valuable our markets have ever known. And since 2008, six different premium Fool services have made recommendations on the stock -- tied for most of any stock available.

If you live in the real world, it's pretty easy to see why this is the case, as the company has absolutely steamrolled once-potent rivals such as Nokia (NAS: NOK) , Research in Motion (NAS: RIMM) , and, to some extent, even Microsoft (NAS: MSFT) .

In January 2008, co-founding Fool David Gardner saw the seeds of greatness and recommended the stock. At the time, iPods and Macs made up 78% of all revenue for the company, but David saw potential: "the iPhone should get Apple to about $72 billion in revenue by 2012."

Well, through the first three quarters of fiscal 2012, the iPhone has brought in just over $63 billion. The company will probably surpass David's estimate, but it was eerily prescient.

A crucial investing lesson
If there's one investing lesson to take away from our love affair with Apple, it's this: No matter where a stock has been, remember that the future matters more than the past. In 2011 alone, Fool services made six separate Apple recommendations.

Take a look at what the stock's journey looked like up until 2011, and you'll see why many investors may have shied away, feeling that they'd missed the boat.

AAPL Chart
AAPL Chart

AAPL data by YCharts

But this didn't faze our analysts. Last October, Ron Gross, senior analyst for Million Dollar Portfolio -- bought shares of the company, saying: "We see big things ahead for Apple's products, its international sales, and its role in business. Once you look at these catalysts, you see that Apple is worth much more than what we're paying for it today."

It turns out Ron was right. Here's a look at how the company has done since Ron made his call.

AAPL Chart
AAPL Chart

AAPL data by YCharts

But here's the catch: There's still time to buy in
OK, so Apple had a great spurt just after the Great Recession, and another one over the past year. But there can't be any gas left in the tank, right?


Apple currently resides on David Gardner's list of "Core" stocks for Stock Advisor members, and Million Dollar Portfolio has labeled it a "Buy First" company. Beyond the coming release of the iPhone 5, investors can look at international expansion, the possibility of an iTV, and the history of innovation the company has displayed as possible drivers of future growth.

The company just initiated its first dividend payment, and it's trading for only 16 times earnings and 14 times free cash flow. Those are very attractive numbers for a company growing as fast as Apple is.

If you'd like to find out more about Apple -- all of its opportunities, and potential pitfalls, check out our new premium report on the company. Getting a copy will also give you access to real-time updates on latest company developments.

Better yet, if you'd like to continue using the Fool as a source to better your knowledge of the financial world, jump over to our special page, On Sept. 25, we're taking a day to celebrate the art of investing, and we encourage your participation. Jump on over to the site now to continue your own personal investing voyage.

The article Don't Be a Contrarian With This Super-Loved Stock originally appeared on

Fool contributorBrian Stoffelowns shares of Apple. The Motley Fool owns shares of Apple and Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Apple and Microsoft, creating a bull call spread position in Apple, and creating a synthetic covered call position in Microsoft. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.

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