Could British Investors Profit From Apple?

LONDON -- Until a few months ago, the share price of Apple (NASDAQ: AAPL  ) went only one way: up. And particularly so since the credit crunch and ensuing recession of 2007-2008. As other tech titans faltered, Apple surged on regardless, churning out hit products such as the iPhone and iPad.

Turn the clock forwards, and Apple shares are over a third down on their September 2012 peak, and 10% down on the week. To blame: a series of seemingly small missteps, exaggerated expectations, and a Q1 2013 earnings release that missed consensus analyst estimates (but only narrowly).

As a result, while troubled Dell and Hewlett‑Packard stagger on, Apple seems more appealing than either business. And unlike Dell and HP, don't forget, Apple is a business that has seen a 260% increase in sales over the past four years, and has got almost $140 billion sitting in the bank.

So should British investors consider a stake in Apple?

Buy American
Apple, it's fair to say, is not a share that many British investors will ever have considered buying -- despite the fact that buying the shares of international companies is now easier, and cheaper, than ever.

Indeed, America's stock markets could well be considered a "must buy" for serious long-term investors, making up as they do a whopping 52% of the MSCI World Index. The U.K., by comparison, makes up just 9%.

Yet for all of this, few of us seeking exposure to America's markets get further than buying an American index tracker -- such as HSBC's low-cost HSBC S&P 500 ETF, or Vanguard's Vanguard S&P 500 ETF.

Doing the deal
The facts: look closely, and for most investors, trading through most "big name" brokers, buying American shares is no more complicated than buying British shares.

Granted, the commission is a little higher, and there are foreign exchange costs to take into account, but these aren't excessive. My broker, for instance, charges just 11.95 pounds commission -- and don't forget that with foreign shares, there's no stamp duty to pay.

That said, there's a little more form-filling involved. America's Internal Revenue Service charges a 30% withholding tax on dividends, for instance, and overseas investors -- that's you -- need to fill in a W-8BEN form once a year to get a reduced tax rate.

The good news? Every broker is familiar with these forms, and filling it in is very straightforward. Putting it another way, compared to when I first bought American shares through an American broker in the 1990s, today's dealing arrangements couldn't be simpler.

So is Apple a buy?
Clearly, Apple faces some headwinds. The supply problems that have dogged the iMacs, iPad, and iPhone product lines need addressing, for a start. More troubling is the threat from Google's Android. For as the sparkling results from Samsung highlight, Apple's iOS isn't the only game in town.

But there's no denying Apple's stellar record in recent years, which has seen sales, profits, and earnings per share all soar. Heck, the company is once again paying a dividend, which by my reckoning it hasn't done since 1995.

Metric 

Year Ending September 2012

Year Ending September 2011

Year Ending September 2010

Year Ending September 2009

Revenue

$156.5 billion

$108.2 billion

$65.2 billion

$42.9 billion

Pre-tax profit

$41.7 billion

$25.9 billion

$14.0 billion

$8.2 billion

Earnings per share

$44.15

$27.68

$15.15

$9.08

Dividend per share

$2.65

$0.00

$0.00

$0.00

Further missteps and operational issues apart, the danger is the one faced by investors in any fashionable business that's popular with consumers: buying the brand, and not the business. For as we've most recently seen with Facebook, when the hype evaporates, investors can be left nursing losses.

Changing hands today at $454, Apple's shares are rated on an attractive forecast price-to-earnings ratio of 9.5, and offer a historic yield of 2.4%. Obviously, there's a lot of anticipated earnings growth baked into the price, but Apple has thus far delivered that in spades. If -- as I expect -- the business gets back on track, then today's share price weakness could seem like a missed opportunity.

Follow the money
One investor who certainly buys on weakness is Warren Buffett, whose Berkshire Hathaway investment vehicle has delivered returns of over 20% per annum since 1965, and turned Buffett himself into the world's third-wealthiest person.

As it happens, Buffett recently took advantage of weak results and a dip in the share price to top-up his holding in one particular FTSE 100 share -- an unusual move for an investor who rarely ventures outside the United States. As a result, he now owns over 5% of this company, which he first began buying back in 2006.

Its name? Simply download this free special report from The Motley Fool -- "The One U.K. Share Warren Buffett Loves" -- to find out. Inside, you'll discover just why Buffett has invested over 1 billion pounds in this business, and why you could consider taking a stake, too.

With the share price sharply up in Buffett's most-recent purchase price, the share is still rated below the P/E of the FTSE 100 as a whole, and also offers a market-beating prospective yield of 4.2%. As I say, the report is free, and can be in your inbox in seconds. Click here to download it.

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