(NASDAQ:AAPL) has traded more than 8 million shares per day over the past three months. While Apple might be a popular stock to trade, it's also stock that has three key disadvantages that should make investors question its popularity. Every trader should consider the following when deciding whether Apple really is the best stock pick for his or her portfolio.
1. Look at performance and cost per share versus that of other tech stocks
Apple is currently trading at $531.17, making it a very expensive tech stock to include in a portfolio. Compared to other technology companies traded on the Nasdaq, Apple is one of the more expensive and can take up a lot of buying power in one's trading account. Today, 1,000 shares of Apple will cost a trader more than half a million dollars.
An investor would be wise to consider other, cheaper technology stocks with similar or better results instead. Stocks such as Facebook
(NASDAQ:FB), trading at $61; Netflix
(NASDAQ:NFLX), trading at $348; and Baidu
(NASDAQ:BIDU), trading at $160, offer comparable returns or better with a much smaller price tag. According to Morningstar, Apple's one-year performance was 39%, while Facebook's was 138%, Netflix offered 113%, and Baidu offered 85%. Trading a less-expensive stock with the same or greater returns can increase your profitability.
2. Apple is a volatile stock
At first glance, the volatility of a stock can mean opportunity. But when a stock behaves with the unpredictable price swings we've seen in Apple, traders can actually feel frustrated. Price may have moved up, but as historical data proves, these prices can also retrace back. As we've seen over the last two years, the price of Apple has increased by 92% from its low around $350 (December 2011) to a high around $675 (September 2012). It then fell 44% to its low of $380 (April 2013) and bounced back to a current price of around $525. Apple's big swings offer little comfort to an investor trying to build equity over time in a portfolio. In my opinion, this stock's volatility swings offer a greater potential to hit your stops rather than your profit targets.
3. "iHype" is showing signs of fading.
Over the last few years, Apple products have become must-haves for many people. Trendy "i" accessories such as the iPod, iPad, and iPhone have helped Apple become a dominant player in the technology category. While Apple has enjoyed popularity, especially in the handheld sector, its domination is starting to fade, leaving an investor to surmise that stock prices might be at highs and on their way lower.
A report from Kantar shows that between February 2013 and February 2014, Apple's iOS lost 5% market share in the US. Most of this market share has been taken by devices using competing Android operating systems, which increased their market share by 4% over the same period. Android now enjoys 55% of the market share in the US compared to iOS with a 39% share. As we've already seen with the downward spiral at BlackBerry
(NASDAQ:BBRY), every new product release is critical to the success of the stock price. With the upcoming release of the iPhone 6, Apple stocks may be in for a bumpy ride.
While many may flock to trade Apple, investors would be wise to pay attention to these three disadvantages. My apple a day remains the actual fruit, and my portfolio is much healthier for it.
Sarah Potter is the founder of SheCanTrade.com, an education and community portal for active investors of all experience levels. Sarah's book How You Can Trade Like a Pro is a straightforward guide to trading options, futures, and ETFs. Sarah's YouTube channel has a growing library of videos on trading strategies, market analysis, and live trading sessions.
No positions in stocks mentioned.