The Consensus Opinion on Apple: Mostly Bullish

Apple (Nasdaq: AAPL  ) has been on fire lately -- up more than 400% over the past five years -- so it's no surprise that there's plenty of retail and institutional interest in the company. Indeed, last year Apple was among the top 30 most-owned stocks by investment clubs, as measured by the folks at Better Investing. If retail investors were high on the stock, it got me to thinking: What's the consensus sentiment view on Apple?

Turns out, the view is mostly bullish. Let's have a look at a few of the key sentiment drivers.

1. Analyst opinion
Analysts have a favorable opinion of Apple. Data from Yahoo! Finance captures their collective feeling:

Opinion

Number of Analysts

Strong Buy 28
Buy 22
Hold 3
Sell 1

A total of 50 analysts have a "strong buy" or "buy" rating, with a mere three "holds" and a lone anomaly of a "sell." That's a stupendously bullish outlook from analysts.

2. Insider buying
Next we'll look at insider buying and selling. This picture isn't as rosy for Apple.

Over the past year, Apple insiders have sold $252 million worth of their company stock. During the same time period, insiders didn't buy a single share of stock. (Data from Form4Oracle.)

Although $252 million of net insider selling isn't all that meaningful relative to Apple's $325 billion market cap, and even though insiders sell stock for a whole host of reasons -- to pay for a house or tuition, to diversify assets, and so forth -- it would be nice to see some insider buying. For Apple, we'll classify insider buying/selling sentiment as bearish.

3. Guru buying
Next, we'll look at "guru" ownership of the stock. According to GuruFocus, in the quarter ended Dec. 31, four investing gurus were buying Apple and two were selling. Among the buyers were George Soros, Wally Weitz, and Daniel Loeb; Steve Mandel and Ken Heebner (known for moving in and out of positions quickly) were sellers. In the previous quarter, six gurus were buying, versus four sellers. (Adding to the positive sentiment, Apple is also a recommendation in our Motley Fool Stock Advisor flagship newsletter service.)

Though the guru picture is mixed, more gurus were buying than selling, so we'll call the trend "somewhat bullish" for Apple.

4. Retail-investor community sentiment
For retail-investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock-rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, indicating that the Fool community believes in a stock's future. Apple has a neutral three-star rating.

5. Short sellers
Next we'll look at whether short sellers are circling the stock. There are 10 million Apple shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 1.1%. That's not very high -- for instance, it's nowhere near the 13.3% short interest for struggling bookseller Barnes & Noble. For determining sentiment, we'll classify the lack of short sellers as bullish.

6. Does Buffett own it?
This is the "cherry on top" test, and in Apple's case, it's a no: Berkshire Hathaway does not own shares of Apple. (Not much of a surprise, given Warren Buffett's famous aversion to technology stocks.)

Adding it up
Analysts are extremely positive on Apple. Although less so, the guru trend is also bullish, and short sellers aren't targeting the company in any significant way. The CAPS retail-investor community is neutral on Apple, but the insider sell/buy picture is a bearish indicator. Berkshire doesn't own shares of Apple, either. Add it all up, and Apple comes out with a consensus sentiment of "mostly bullish."

Of course, you can't base an investment philosophy on who likes or dislikes the stock you own, and a consensus bullish opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."

The purpose of this series of articles isn't to make a definitive buy-or-sell call on Apple. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.

One final thing: If you want to keep tabs on Apple's movements, and for more analysis on the company, make sure you add it to your Watchlist.

Fool.com managing editor Brian Richards owns no shares of any companies mentioned. As mentioned, Apple is a Motley Fool Stock Advisor pick. Berkshire Hathaway is a recommendation of Motley Fool Inside Value and Motley Fool Stock Advisor.The Fool owns shares of both Berkshire Hathaway and Apple, and the Fool has also written puts on Apple. Read about The Motley Fool's disclosure policy.


Read/Post Comments (4) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 20, 2011, at 1:20 PM, Henry3Dogg wrote:

    The insider test is inappropriate on a company growing, over an extended period, as Apple is.

    Most of the insiders would likely hold options and stock that represented the bulk of their wealth, and they are not all highly paid e.g. SJ $1

    So it is to be expected that some selling will occur.

    The question that you did not ask, is what percentage of insider held stock was sold. The answer is, a very small percentage. The fact that you did not ask the question, makes me wonder.

    On Warren Buffet, one might also ask the question, did WB hold Apple stock over the last five years over when Apple has been one of the best stocks on the market (NO), and did WB get a higher average return over that period (NO) in which case does the fact that WB doesn't own the stock now matter at all (NO).

  • Report this Comment On February 20, 2011, at 2:28 PM, ConstableOdo wrote:

    You seem to be forgetting the bearish Steve Jobs health factor which will continue to drag down this stock at every opportunity. Any unsubstantiated negative rumor of Steve Jobs will instantly knock $10 from this stock. Any partially confirmed rumor will send it down much further. This only goes to show that investors think this stock is nothing without Steve Jobs sitting at his office desk.

  • Report this Comment On February 20, 2011, at 3:07 PM, bricks79 wrote:

    Most knowledgable investors understand that the Apple management bench is very strong and will survive post Jobs. Although Jobs is an important leader, he has also installed a strong bench with Tom Cook. The value in the company isn't simply SJ, it's in the company's platform. Selling at 15-16X earnings and 12-13X minus their cash, Apple is reasonably priced and will most likely be a $400 stock in the next year.

  • Report this Comment On February 20, 2011, at 3:15 PM, bepah1 wrote:

    With the unabated runup of the stock for the past year, the potential of competition from 'droid' based pads, and the bad news regarding Mr. Jobs, I would thin kits is unlikely that the stock will be moving up for a while. Of course, the multiple is not a lot higher than the rest of the sector, when you facto in the 'Jobs presence', but any questions along any of these line will probably have a large pullback impact.

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