3 Irrefutable Reasons to Sell Apple

A company is either worth owning or it's not. Like many investors, I read nearly every viewpoint under the sun about what to buy and what to sell. I especially pay attention to what is said about Apple (Nasdaq: AAPL  ) , because I have money invested in it. 

Apple has had an amazing run, but is it time now to sell? The answer is irrefutably "yes" -- if you think any of the following three statements are true.

1. Another market collapse is imminent.

If you think a market collapse is coming soon, selling Apple (and other stocks) makes sense. I suspect that even the most stalwart buy-and-hold investors would consider selling if they strongly believed a market meltdown was around the corner.

Is a steep market downturn on the way? Some might point to the recent announcement by Cummins (NYSE: CMI  ) as a hint that bad things are around the corner. Cummins had been calling for 10% revenue growth in 2012, but it is now stating that there will be essentially no growth.

Others might look to one of the crises looming on the horizon, such as the tax cuts set to expire at the end of 2012. Then there are the global uncertainties, like China's economic slowdown, and continued fears over the Eurozone.

The truth is that we don't know for sure what will happen with the markets. However, in my view, none of the examples that I have given portend an imminent market collapse. Cummins' bad news on revenue growth was accompanied by a dividend increase. That indicates confidence for the long term.

While the President and Congress habitually allow major decisions to go down to the wire, they usually do something to prevent an outright crisis from developing. China's economy is expected to rebound by the end of the year.

If you truly believe markets will tank, sell Apple. If you think any downturn would be muted and short-lived, keep your shares.

2. Apple's growth has peaked.

Apple is still cheap if the company continues to grow even close to how it has grown over the past few years. But if you think the growth is tapering off significantly, it makes sense to take your profits.

Are there any reasons to believe Apple's growth has peaked? Google's (Nasdaq: GOOG  ) Android operating system trumps Apple in market share for cell phones. Google has done well in the tablet market, as well. Still, iPhone and iPad sales continue to grow.

Amazon (Nasdaq: AMZN  ) might be a successful Apple-slayer with its rumored new smartphone. However, some also predicted that Amazon's Kindle Fire could seriously hurt iPad sales. That didn't happen.

My guess is that we could see a slowdown in growth for Apple in a few years. I wouldn't bet on slowness materializing in the next year or two, though. I'm holding on for now.

3. There are better stocks to own.

If you think there are better stocks to own, sell your Apple shares, and use the proceeds to buy those stocks instead.

Growth investors could look to a smaller company in a burgeoning new market. One possibility is Fusion-IO (NYSE: FIO  ) , a leader in the fast-growing solid-state drive market. The stock is currently trading 50% below the average analyst target estimates.

For some, a stock that pays higher dividends might make sense but, for many investors, Apple still offers compelling qualities. Earnings growth topped 94% in the last quarter. With a forward price-to-earnings ratio of 11, the stock is valued attractively. The upcoming dividend payment is simply icing on the cake.

Refutable

Investors can disagree about plenty of things. Will the markets go up or down? Will a company grow or not? Which stock is best?

With respect to Apple, I don't think many would disagree that this company is one of the greatest success stories of our time. Investors who hung on to the stock have profited greatly.

If you think any of the three premises I gave above are correct, sell now. As for me, I don't think any of them are true. I think Apple remains one of the best growth -- and value -- stocks around. Am I right? Refute away.

To get another take on whether Apple has more to run, make sure to pick up a copy of our brand new premium research report. In it, our top technology analyst, Eric Bleeker, goes through a number of key opportunities and threats facing Apple, and how he thinks investors should position themselves leading up to some key events this year. Click here to learn more.

Fool contributor Keith Speights owns shares in Apple but owns no shares in any other company mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services have recommended buying shares of Amazon.com, Google, Apple, and Cummins and have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (23) | Recommend This Article (21)

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 July 12, 2012, at 11:48 PM, dstb wrote:

    Apple is cheap if it only grows at 10%. It isn't priced for anywhere near its likely future growth.

    Fusion IO is selling a commodity. I'll stick with Apple.

    And of course the market could always tank at any time. But why is that relevant to Apple specifically? All stocks are likely to sell off. This article makes no sense at all.

  • Report this Comment On July 13, 2012, at 12:57 AM, gslusher wrote:

    "Google has done well in the tablet market, as well."

    Would you care to provide proof of that assertion? Does Google manufacture or sell tablets, at least right now? Since it doesn't, your statement is nonsense. Google provides Android to licensees (it's no longer "open source"), but that's it. In testimony to Congress, Google's executives said that the company makes more money from iOS devices than from all the Android phones, tablets, etc.

  • Report this Comment On July 13, 2012, at 1:21 AM, SimchaStein wrote:

    Ha - this is sooo easy to refute:

    1) Market collapse? great to own a dividend paying stock that has defied all recent economic downturns.

    2) Growth peaked: But not stopped. Do the math, and please remove from your valuation model $100B in cash.

    3) Better stocks? Fusion IO? - no dividend. no real moat. minimal brand. Might be great, but it's a 'bet', not an investment. With Apple, you can get dividends and wait out any storms.. AND know that Cook will buy back $10B. Wont' Apple raise dividends next year, and the next and.... And, back to SSD Apple's purchase of Anobit is a deep SSD strategic play.

  • Report this Comment On July 13, 2012, at 1:26 AM, skippywonder wrote:

    Seems most people missed the point. It's like saying one reason to quit your job would be if you think your next paycheck will bounce. But you DON'T think your next paycheck will bounce, so that reason to quit your job is not valid.

    Of course none of these are especially likely. Therefore, don't sell Apple. Just a sort of "fake FUD" article.

  • Report this Comment On July 13, 2012, at 4:07 AM, H3D wrote:

    "1. Another market collapse is imminent."

    There is always one coming. On this case there may well be a significant melt up rally first.

    Most analysts are expecting Apple between 800 and 1100 in the next 12 months.

    so that's hardly an irrefutable case.

    "2. Apple's growth has peaked"

    if you look at quarterly numbers, it has peaked last quarter, but it peaks that quarter every year.

    Apple is highly seasonal. If you look to same quarter previous year, there is no evidence that the growth has peaked.

    But on any case, suppose the growth was now revel at 70% a year. How would that be a reason to sell?

    Irrefutable?

    "3. There are better stocks to own."

    There will always turn out to have been better stocks to own.

    Next year Apple will grow 70%, and someone will grow 800%.

    Your chance of knowing in advance who will grow 800% is close to nil.

    Your 3 "irrefutable reasons" are just the usual FUDS. And not even high end, well argued FUDS.

    Pathetic!

  • Report this Comment On July 13, 2012, at 6:57 AM, macgregor54 wrote:

    misleading headline. click bait.

    this is pablum; pure boilerplate. not an original thought or any actionable info.

    why post it?

    click bait is why.

  • Report this Comment On July 13, 2012, at 8:34 AM, Mathman6577 wrote:

    I agree with you. Apple is a great company, has great products and AAPL is a great stock .. one of the best stocks over the last 10 years and should still be great over the next few years based upon the projections for products coming out later this year including iPhone5, iPad mini, IOS6.

    I wouldn't worry about the competition .... Google (looking at just the operating system is not the way to compare Apple to anyone else -- you can't run an OS without hardware and Apple makes the best hardware), Microsoft and Amazon don't seem to be a major threat to Apple .... look what Apple did to RIM and Nokia over the last 5 years -- completely obliterated. RIM will be lucky to survive the next year.

  • Report this Comment On July 13, 2012, at 9:17 AM, Jon408 wrote:

    Are most of the posters who replied complete idiots who can't do more than skim an article before they post? Sheesh. This is not against AAPL, it's FOR AAPL.... Morons.

  • Report this Comment On July 13, 2012, at 10:28 AM, setht23 wrote:

    Yeah Jon I'm with you, almost none of these commentors understood the article. Before you all start criticizing someones writing work on your reading comprehension.

  • Report this Comment On July 13, 2012, at 10:44 AM, tkell31 wrote:

    I'm with Macgregor, this was cheese for the rats and it worked perfectly. Not particularly well written, but I do agree this is an easy buy for the next 12 months, what happens after that will depend on Apple's ability to innovate and maintain margins.

  • Report this Comment On July 13, 2012, at 1:27 PM, Sketchmonkey wrote:

    After reading this article, and yes I read the entire article , and the comments,

    I wonder about several things. What was the point? Irrefutable reasons to sell

    a stock that I am keeping? Do as I say not as I do? How to rope someone into

    an article with a fantastical headline? How to regurgitate existing speculative

    theories about the AAPL and the market?

    The title should be "If you haven't been paying attention to every other article

    speculating about Apple, then you can skip this one as well."

    I joined motley fool because I would have "Full access to The Motley Fool's spin-free

    take on the stock market, our valuable community features, and weekly best-of email.

    Sign up today for FREE, and join the world’s greatest investing community!:"

    Or not.

    The author has covered no new ground, contradicts himself and has wasted my time.

    And I'm writing about it. Maybe that was the point.

  • Report this Comment On July 13, 2012, at 1:42 PM, TheRealRacc wrote:

    The problem is that AAPL has cult-like effects on the human brain and as a result it compels a lot of uninformed and undereducated people to speak emotionally and strong in defense of the Apple company any time it is mentioned in a negative light.

    Much like you see Scientologists protect their organization. This is very much in line with that type of behavior. You can look at any Fool.com article with AAPL mentioned and you will see at least 5 irrational comments declaring AAPL to be the greatest stock on the market.

    Not that it isn't, just scary what it has done to people.

  • Report this Comment On July 13, 2012, at 1:43 PM, Sketchmonkey wrote:

    That would have been more poignant, if I didn't hard return and say "the AAPL". Jon and Seth, clearly you have the right take on this. We are all morons who couldn't see past the click bait mocking of the nervous investor. You are correct, In this economic environment I think it's better to play 'Mad Money', than to inform. Your sardonic wit has defeated us all.

  • Report this Comment On July 13, 2012, at 9:42 PM, MoneyTweetzz wrote:

    The arguments to sell $AAPL here lack analysis.

    1) The market might collapse, yes, so does that mean every publicly traded company is a sell?

    2) You answered your own question as to whether $AAPL's growth has peaked: last quarter earnings growth of 94%...

    3) There might be better stocks to own, maybe, maybe not. Time will tell.

    We have $AAPL as a buy, with a price target of 800$: http://moneytweetz.blogspot.ca/2012/07/great-investments-aap...

  • Report this Comment On July 14, 2012, at 8:03 AM, maximstrelzow wrote:

    another meaningless article to keep an impression something is going on on the site, simulating some brain activity by motley fool

  • Report this Comment On July 15, 2012, at 6:48 AM, Jphurlbert wrote:

    About 3 years ago, some "brain surgeon" analyst on CNBC said Apple was going to crash back to $50 or so......funny, I think he's working a soup kitchen now. Take a few minutes and go to the mall and visit the mobbed Apple store.......mobbed every single day, then tell yourself that the world of Apple is coming to an end. Sometimes I wonder where these doomsayers come from. As Peter Lynch wrote, just take a look at what your kids are buying when you evaluate a stock........

  • Report this Comment On July 15, 2012, at 10:59 AM, Crosshair wrote:

    People, like it or not, Keith makes a good point:

    1. Another market collapse is imminent: Yes, when your stock is strongly associated with the last run-up, it's the first to get hit when the market collapses. Contrast this with some names that I hold, a market collapse is likely to leave my portfolio unscathed (relatively).

    2. Apple's growth has peaked: Is this really difficult to fathom? Apple is generating a Return on Invested Capital approaching 40%. This is astronomical! It's just a matter of time before Apple's return on capital come crashing to a more sustainable level.

    3. There are better stocks to own - This is a given, as I agree the above two points are nearly impossible to refute.

  • Report this Comment On July 15, 2012, at 12:31 PM, bossman5000 wrote:

    If you're going to go long AAPL might as well go long SPY where it makes up ~5% of the index.

  • Report this Comment On July 15, 2012, at 5:02 PM, TMFFishBiz wrote:

    I'm glad to see this article stirred things up a little! Some commenters had never posted a comment on an article previously. It's great to see you all engage at The Motley Fool.

    Several of you have raised good points and objections, so I thought I would respond.

    • Guilty as charged on the accusations of using a deliberately provocative title to attract attention. I do like SketchMonkey's title suggestion, though. "If you haven't been paying attention to every other article speculating about Apple, then you can skip this one as well" is kind of catchy!

    • The point about Google doing well in the tablet market was intended within the context of the previous statement about their OS market share in the cell phone space. Strategy Analytics reported earlier this year that Android had a record 39% market share in tablets. My point wasn't that they are necessarily making money, but that they present a barrier to Apple. (Of course, my real point was that Apple is succeeding like crazy anyway.)

    • I have to respectfully disagree that the article made no sense and was contradictory. (Of course, I'm biased!) The article gives three solid reasons to sell Apple – IF you think they hold true right now. These reasons apply to any stock. I also explained why I don't believe those reasons are applicable currently. This is basically the "set up the straw man and knock him down" approach.

    • The objection that there was no original thought or deep analysis is correct. The reasons given in the article are both simple and obvious. However, I would argue that some of the worst investing mistakes are made when the simple and obvious are ignored. I don't think that it's a bad thing to be reminded of them from time to time.

    I appreciate all of you reading the article and taking your time to comment. Please keep reading and commenting. I hope you all have an irrefutably great week!

    Thanks,

    Keith Speights

  • Report this Comment On July 15, 2012, at 6:38 PM, bretco wrote:

    It was still "click-bait" and still wasted most (not all)

    of your readers time.

  • Report this Comment On July 19, 2012, at 6:34 AM, TempoAllegro wrote:

    I'll give you 3 better reasons to sell, as a former shareholder:

    1. Incompatibility of songs or other content bought on one Apple device on other types of devices or even other Apple devices

    2. Farming out production to potential competitors such as Samsung.

    3. Secretiveness within the company makes for collaboration – random or otherwise – nearly impossible

    At this price, I wonder if there are better places to put my investing dollars other than AAPL. So my real point is not that I think AAPL will not perform well for the foreseeable future, but that I think such a high-performing company cannot make any missteps well into the future to maintain its perch. For a mundane business I would be happy to believe they could do it, but for a tech company with a serious style component, I do not think so.

  • Report this Comment On July 19, 2012, at 12:19 PM, sharpx2 wrote:

    One would have to be a fool indeed to sell Apple before the iPhone 5 (or whatever it is finally called) hits the market. I believe this will be the single best selling product that Apple has ever introduced. Of course, my certainty about this falls in the same category of feeling certain about any of the points raised in this article. As far as I can see, Apple is a couple of worlds ahead of their main competition, mostly because they operate with (at least) a five year plan and already have the next product in development when one is introduced. Other companies are far too reactive and imitative instead of innovative. So unless the people at Apple suddenly forget why they have been so successful since the second coming of Jobs, I can't see a reason for their business model to suddenly fail. But as they say, we shall see.

  • Report this Comment On July 19, 2012, at 9:26 PM, JungleGent wrote:

    Yup, cheesy article. But, for what it's worth, it DID get a lot of comments. Some of these comments are awesome. I especially like the one right above mine, by sharpx2.

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