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Weekend Edition

One of the world's greatest stocks is at least 20% undervalued right now
Saturday, August 17, 2013

 Shares of consumer-electronics giant Apple jumped nearly 5% last week after investing legend Carl Icahn announced he'd taken a large position in the firm (reportedly $1 billion).
 
Icahn, who's 77 years old and worth about $20 billion, shared news of his position through the social-networking site Twitter, telling his 54,000 followers:
 
We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come.​
(The Securities and Exchange Commission ruled in April that companies could disclose important operational information – such as a position in Apple stock – via social media, as long as the firm lets investors know information may come from social media.)
 
Icahn is urging Cook to pursue a large share buyback. He believes the company is worth $625 per share even without earnings growth. Right now, Apple is trading about 20% below that level.
 
 Dan Ferris recommended shares of Apple in the June issue of his Extreme Value newsletter. He added it to his elite list of World Dominators. World Dominators are the No. 1 companies in their industries. They're consistently profitable, year after year. They gush free cash flow. And they pay a lot of that cash out to their shareholders.
 
When Dan added Apple to the portfolio, he wrote...
 
In ways that count for rational, value-oriented, long-term investors, Apple is one of the safest stocks in the world today.
In ways that count for rational, value-oriented, long-term investors, Apple is one of the safest stocks in the world today.
 
 He said Apple was safe for two reasons – it had a lot of cash in the bank and there was a good margin of safety...
 
There's no substitute for a growing pile of cash in the bank. Apple has more cash in the bank than any non-financial company in the world, according to data compiled by Bloomberg. On its March 30 balance sheet, Apple reported about $145 billion in cash and securities. That was three months ago. It certainly generated billions more in excess cash since then...
 
The stock trades around $420 a share today. At that price, you get its iPhone and iPad businesses for around 8-10 times free cash flow (minus its enormous cash hoard of $145 billion)... and you pay nothing for its other businesses.
 
You pay nothing for Mac desktop and notebook computers. You pay nothing for iTunes movies, music, and books. You pay nothing for the App Store, iPod, iRadio, or any other part of Apple. That's too cheap. As a cash-gushing, brand-name company, Apple is worth more than its current share price.
 Apple is trading for around $500 a share – its highest share price since January. Extreme Value readers are already up nearly 15% on the position. And if Dan and Icahn are correct about Apple's future prospects, the upside is massive from here.
 
 Apple was a topic of Porter Stansberry's first ever live-training webinar...
 
On Thursday, Porter hosted an online conference about his option-trading strategy called "Alpha."
 
As we explained earlier this week...
 
We've discovered another anomaly that gives almost any investor... at almost any time... on almost any stock he wants to own... the opportunity to invest with lower risk and earn profits that are far greater than what's possible by just owning the stock outright.
 
As we'll show you... you can take advantage of this anomaly to amplify the gains you make on stock investments... potentially big triple-digit gains on margin. And you can do that without taking on any more risk than you would by simply buying the common stock – less risk, in fact.
That's the Alpha strategy... And earlier this year, Porter launched his new trading service, Stansberry Alpha, to show readers how to use the strategy to set themselves up for big, safe gains.
 
So far, he has compiled an impressive track record... Since launching the service, Porter and his team have closed six positions for an average gain of 79%, with an average holding period of less than five months. Their open positions are showing an average gain of 35% in two months.
 
 On the call, Porter explained the simple anomaly using Apple as an example...
 
It all boils down to one concept, which he explains on the call. Porter also explains how your ability to leverage into these positions using options can greatly increase your gains...
 
Another trade Porter and his analyst Brett Aitken discuss on the call shows how you can make 18%-55%... even if the stock goes nowhere. It's a great way to produce income in today's market.
 
Plus, Porter is joined by a surprise guest... a fellow options-trading expert who actually first showed Porter these trading strategies.
 
 To make sure you see the replay, click here. And to learn more about Stansberry Alpha – and how to get $1,000 off a one-year subscription – click here.
 
We hope you enjoy the call... And we hope you decide to try Porter's Alpha strategy for yourself.
 
Regards,
 
Sean Goldsmith
 




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