Despite the S&P 500 surging 29% year to date, it's been a tough year for many investors. Lots of growth stocks, for instance, have underperformed this year -- and some have plummeted. Zoom Video Communications, Peloton Interactive, and Fastly, for instance, have fallen 42%, 54%, and 73%, respectively, as part of a sell-off in many growth tech stocks. With some stocks taking hits like this even as some market indices appreciated nicely, many investors may be burnt out on stock picking.
But before investors get discouraged and give up on stock picking, they should consider this idea. This stock's underlying business offers both resilience in the form of massive cash flows and a strong balance sheet and impressive long-term growth prospects. This stock idea is none other than Apple (AAPL 0.70%). Though the company may be well-known, its shares are arguably significantly underappreciated.
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Fast-growing sales
Perhaps one misconception investors who don't follow Apple well may have is that the company must be growing slow given its massive size. After all, Apple has nearly a $3 trillion market capitalization. "Aren't its growth days behind it?" some investors may wonder. But this is far from reality. Despite a challenging global operating environment, Apple's revenue grew 33% year over year in its fiscal 2021 -- a 12-month period ending in September. And this growth would have been even faster if it weren't for supply constraints that led to billions in lost revenue over this period.
Further, Apple's sales momentum is broad-based. In the trailing 12 months ending Sep. 25, 2021, Apple's iPhone, Mac, iPad, and services revenue increased 39%, 23%, 34%, and 27%, respectively. The company's combined sales from wearables, smart speakers, and other accessories grew 25% year over year.
Strong cash flows
But Apple doesn't only give investors access to growth, it gives them a stake in strong free cash flows. The tech giant's trailing-12-month free cash flow was a whopping $93 billion -- up from about $73 billion 12 months earlier and $59 billion two years ago. On top of this free cash flow the company has a net cash position of $66 billion.
All of this cash gives Apple a lot of optionality in the way it invests in order to build shareholder value. In the company's September-ending fiscal 2021, Apple was able to deploy $11.1 billion in capital expenditures, pay $14.5 billion in dividends to shareholders, and repurchase nearly $86 billion worth of its shares.
That last point about what Apple can do with its cash is key. By repurchasing shares so aggressively with excess cash, Apple is increasing the amount of claim each share has to the tech company's business. And since Apple was able to repurchase all of these shares at prices lower than where the stock is trading today, those repurchases have had a significantly positive impact on per-share intrinsic value. Going forward, since Apple stock still appears undervalued, continued repurchases will likely contribute further to building shareholder value.
There are plenty of risks, of course. First and foremost, it's unlikely that Apple keeps up the levels of growth it served investors in 2021; if growth decelerates too rapidly, this could be a concern. Further, while Apple's growth is broad-based, the company is still heavily reliant on iPhone. The product segment accounted for over half of fiscal 2021 revenue.
Overall, Apple is a great stock pick for 2022 and beyond because it offers both resilience and strong growth prospects.
