While last year's economic downturn has created a challenging environment for the entire tech industry, one company has remained resilient and become a haven for investors seeking reliability: Apple (AAPL 2.42%).
This company has gained a reputation over the years for offering consistent gains. In fact, amid macroeconomic headwinds in 2022, the iPhone manufacturer was one of the only companies to outperform the Nasdaq Composite index among some of the biggest names in tech -- as seen in the table below.
Data by YCharts
The dominance of Apple's products has allowed the company to expand across multiple markets, making its stock an increasingly compelling investment. As a result, now is a great time to learn more about this tech behemoth.
Here are three things about Apple that smart investors know.
1. A walled garden of products
One of the biggest drivers of Apple's success is its walled garden of products that offer users advanced connectivity between all its devices. This strategic system promotes ease of use for consumers but also makes it difficult to stray from the Apple brand. For instance, iPhone users needing a computer are far more likely to turn to the company's Mac lineup than a competitor almost exclusively because of the connectivity between the two devices.
The company's interconnected ecosystem has been an especially useful tool as the iPhone achieved a leading 24% market share in smartphones. Apple has attracted millions of consumers to its iPhone, who have then stayed within the tech giant's lineup of products with other devices. As a result, Apple achieved the largest market shares in tablets, headphones, and smartwatches as it has climbed to the top of consumer tech.
The company has cultivated immense brand loyalty from its walled garden of products, which will likely factor into Apple's reported venture into virtual/augmented reality later this year. The tech giant is expected to soon launch a new headset, which could see it become the leader of the $31 billion industry projected to hit $52 billion by 2027.
2. Strengthening its business through diversification
Consumers' preference for Apple devices has also boosted the company's growing services business. The iPhone manufacturer's digital services include platforms like Apple TV+, Music, iCloud, Fitness+, News+, and Arcade, quickly becoming the company's second-highest earning segment.
In fiscal 2022, services revenue grew 14% year over year to $78 billion, double the iPhone's growth. The segment also reported the most growth in the fiscal second quarter of 2023, with revenue climbing 5% to $21 billion.
Services are a particularly lucrative way for Apple to diversify its business thanks to attractive profit margins. The segment's profit margin hit 71% in Q2 2023, with the same metric for products coming to 36.7%.
As Apple's digital business continues to develop, it allows the company to lean less on product sales amid short-term economic headwinds. The booming business strengthened Apple's revenue stream and increased reliability in its stock.
3. A history of consistent gains
Apple has become the most valuable company in the world, with a market cap of $2.7 trillion alongside a consistently rising stock. The company's shares have risen about 267% in the last five years and 989% in the last decade as investors have increasingly seen Apple as a haven for reliability.
The company's growth history has attracted some of the market's most prominent investors, with Warren Buffett's Berkshire Hathaway making Apple 39% of its portfolio. The MacBook company is by far Berkshire's biggest holding, dwarfing its second-largest holding Bank of America, which takes up 11% of its portfolio.
Berkshire Hathaway first invested in Apple in 2016, with shares rising 556% since then. However, the holding company continues to prove its faith in the tech giant by consistently increasing its stake and buying more shares as recently as the fourth quarter of 2022.
Apple's ability to outperform the market last year and its history of reliable growth make it an immensely compelling stock at almost any time.
