What Apple Can Teach Us About Investing in Growth Stocks

AAPL StockThe Best Growth Stocks

The stock market landscape is filled with companies that grew exponentially over a relatively short period of time, making a lot of early backers very rich. You’ve certainly heard the names of these great organizations, but one stands apart from the others: Apple Inc. (NASDAQ:AAPL). The myth surrounding the rise and redemption of Apple stock in the late 1990s and early 2000s is the stuff of stock legend at this point. Its reputation as one of the greatest growth stocks of all time is not unearned.

Consider that AAPL stock has seen some truly massive returns over its lifespan. This year alone, the company has hit all-time highs and gained over 37%. And to spice up the story even more, you have larger-than-life figures like Steve Jobs and his own redemption journey paralleling the success of Apple growth.

Apple has essentially become synonymous with stock market success. It is one of the most powerful growth stocks, or at least, has a history as such. The most profitable company in the world is often the target of emulation, but not one competitor has yet to successfully replicate Apple’s trajectory.

What makes Apple stock such a winner? What are the Apple stock predictions? And, more importantly, what are some companies that could be the next Apple?

apple stock chart

Chart courtesy of StockCharts.com

Apple Stock Predictions

Before we get on to the other components of this piece, let’s take a look at where Apple is now, how it go there, and where it’s going.

What truly created AAPL stock was innovation. Most people hardly need a history lesson on Apple, but it’s important to remember how this company got its start. Or at least, how it turned into the most profitable company in the world in the 2000s.

In the tech industry, there’s always talk about having “the next big thing.” Investors sometimes mistake that to mean that they have some new groundbreaking tech that the world has never seen before. But, as Apple proved, that isn’t always the case.

The “iPod” laid out the foundation for Apple stock’s rip-roaring path as one of the best growth stocks ever, and the “iPhone” solidified Apple’s place as a dominant force across the globe. But Apple didn’t necessarily innovate the technology side of things. Many of the features and tech specifications of both products had been accomplished before—and some would even argue had been done better—by other products.

But what made Apple unique is that it was selling its brand as much as its products. It sold an image. Steve Jobs on stage in his jeans and black sweater is an iconic look for a reason, one that helped spur on millions of people to buy billions of dollars worth of Apple products over the years. And he knew what the secret was: Sell an image.

Apple rose to prominence on the back of solid marketing, branding, and great products that combined to make it one of the most successful companies on earth.

And now on to how it’s performing today.

Apple has hit new all-time highs. Part of that is due to buybacks, which Apple employed to cull shares and therefore increase the earnings per share. The company has purchased $70.0 billion in stocks via buybacks over the last two years, and eliminated more than a billion shares. (Source: “Don’t be fooled by Apple’s record high,” CNBC, February 14, 2017.)

The company has also taken on considerable amounts of debt, adding nearly $75.0 billion since 2013. To make matters worse, the company started from nearly zero debt four years ago.

But then you have all the positives going for Apple, like “Project Titan,” the “iPhone 8,” and virtual reality.

To make things even better for Apple stock, the company could be one of the biggest beneficiaries of a potential tax holiday.

U.S. President Donald Trump has repeatedly mentioned his desire to lower the corporate tax rate and allow for a one-time-only sweetheart tax rate deal for companies that would repatriate their funds to U.S. soil.

If Apple were to do this, it would immediately have access to the billions it stashed overseas in order to avoid higher tax rates stateside, and use that money to invest in all manner of directions.

Netflix, Inc. (NYSE:NFLX), for instance, has been mentioned as potentially being an Apple acquisition target. Walt Disney Co (NYSE:DIS) is another company that Apple could use its expansive funds to buy out.

The reason behind both purchases is that Apple has for a long time not had a foothold in the content creation game. With companies like Amazon.com, Inc. (NASDAQ:AMZN) looking to edge in on the streaming industry with “Amazon Prime” offerings as well as publishing movies like the Academy Award-winning film Manchester by the Sea, the sector is certainly lucrative enough to warrant an Apple venture into the space.

Acquiring Netflix or Disney would instantly create a content-creating powerhouse within Apple that could expand the company’s reach even further.

Not to mention that the company has always had a reputation as being a master at branding and even some of its commercials have gone on as the greatest of all time. Think of those “Mac vs. PC” advertisements and Steve Jobs’s famous attack on conformity in the 1980s.

And then there’s the hugely anticipated iPhone 8 release. The 10th anniversary since the release of the original iPhone, this iteration is promising to be one of the most innovative offerings yet, with all manner of iPhone 8 rumors spreading about a potential redesigned screen, look, and augmented reality capabilities.

This is good news for Apple stock, considering it experienced its first year-over-year declines in iPhone sales for three straight quarters before righting the ship.

iphonesales

Between acquisitions, potential aid coming by way of government policy, new products coming down the pipeline, and an extremely proficient management, Apple is looking to be one of the best stocks moving forward for a good little while.

It may not rate as one of the fastest growth stocks anymore, but it doesn’t have to. It already won.

Next Apple Stock

Having just given a brief look at what makes Apple such a fantastic company and AAPL stock so valuable, what is one of the better growth stocks that might emulate the company?

It’s nearly impossible to identify a company that will have the impact that Apple had and continues to have. It’s like trying to point out the next Michael Jordan. Sometimes you get it right (LeBron James) but for everyone “James,” there are many “potential Jordans” who simply couldn’t measure up.

But much like there are signs that point towards a young upstart basketball player having the skills to be dominant on the world stage, there are signs to look for that will help determine which companies have at least a chance of surging like Apple stock did (and continues to do).

Companies That Could Be the Next Apple

As I said, I don’t believe it’s a winning game to point out a company and claim that it will be the next Apple stock. Apple’s growth was such that it is not an everyday occurrence.

But if there is one company I would imagine that could become a truly dominant force in the stock market, it’s Netflix.

The reason I believe that is quite simple: It has a similarly adoring fan base that Apple enjoys across the globe.

Netflix is the streaming king, and despite challengers coming from players like Amazon and the big cable companies, it is still the undisputed head of the sector.

nflx stock chart

Chart courtesy of StockCharts.com

What Netflix has going for it moving forward is that it is managing to shift the entire industry around it. Many of its original content has gone on to garner both critical and commercial success. It’s challenging the movie-making paradigm by releasing films simultaneously on its platform and theaters. It’s even producing its own movies and showing them exclusively on its platform.

Netflix is looking to continue to alter the way we consume media, similar to what the iPhone and iPod did less than two decades ago.

It’s begun to steal away the comedy specials from rival premium cable channels, it’s created several shows that have had lasting cultural impacts, and it has continuously ramped up its production of programming for years now.

The fact is that Netflix is one major innovation or big gain in the streaming industry away from becoming a powerhouse that puts it, perhaps not on par with Apple, but at least in the conversation.

And that’s a conversation any company would be lucky to be included in.

Fastest Growing Stocks

Looking at Apple’s growth, it’s easy to lose sight of what’s important on the market: Gains.

Not every company needs to become Apple in order to be profitable, and growth stocks are some of the best when it comes to seeing large returns on smaller investments.

If you’re aiming for an Apple stock home run on every investment, you’ll be very disappointed before long.

But if you can find a solid company that will provide growth, gains, and a desirable product for years to come, then that’s worth a lot more, even if it doesn’t become the most profitable company in the world.

Remember that Microsoft Corporation (NYSE:MSFT), largely seen as the lamer cousin and rival to Apple, has not had the world-shaking success on par with Apple, and yet, MSFT stock has produced solid results over the years and provided a great dividend.

Growth stocks could easily turn into Microsoft or any other very strong company, and investors would still come out as winners.

Hell, even marijuana penny stocks have shown that exponential growth can happen anywhere at any time, and investors could see thousands of percentage-point returns if they play their hands correctly.

Growth stocks aren’t all going to be AAPL stocks, that’s impossible. But they can still be great investments for the those who find the right companies to buy and hold for the foreseeable future.