I'll be honest: I don't expect much from Apple (AAPL 0.19%) these days. And coming from The Fool's long-standing resident (and admittedly biased) Apple bull, that should mean something.
Don't get me wrong; I don't think Apple's story is over, nor do I think the business is deteriorating. Rather, I've tempered my expectations about how Apple may perform going forward. The company has fallen into a predictable cadence in terms of how its products will evolve, and even the new product categories that Apple has entered only look modestly promising. It's tough to beat the iPhone's financial results, and there should be little doubt that the smartphone market is maturing. For instance, Apple Watch 2 doesn't seem particularly promising in terms of catalyzing upgrades, although maybe it can help with broader smartwatch adoption numbers.
Check your expectations at the door
Gone are the days when investors could expect market-thumping returns from the Mac maker. Instead, consider other consumer staples that merely match the broader market's performance but also pay reliable dividends that increase on an annual basis.
Take a minute to appreciate that statement, though. It's an impressive feat in itself that Apple has turned a $600 smartphone into a product that is regularly upgraded and can reliably generate recurring revenue. Consumer staples typically include things like laundry detergent, Band-Aids, over-the-counter painkillers, beverages, or other items you pick up at the grocery store without much thought. Yet we're talking about a $600 smartphone that quite a few people upgrade regularly, either every year or every two years, instead of $5 products that you buy every other week.
Consumer staples stocks are among the favorite holdings of many investors. They might not outperform the market most years, but they're also unlikely to underperform the market, too. With mature consumer staples companies, investors look for consistent cash flow above all else, in part to sustain the dividend payouts. And Apple has cash flow in spades.
Time to rebalance?
All that being said, I plan on being a long-term Apple shareholder for the foreseeable future. Over the years, Apple has grown to become a disproportionately large holding in our family portfolio (although a particular electric-auto maker recently overtook Apple as our largest holding, due to its astronomical rise in recent years).
But I'm a growth investor, through and through. I'm fairly young, have a long time horizon, and a high risk tolerance. So for these reasons, I'm likely to rebalance my own personal portfolio and diversify away from Apple (in line with The Motley Fool's disclosure and trading policies, of course). I simply don't consider Apple a growth stock anymore, in part because I've lost confidence in the broader market's willingness to assign Apple better-than-market valuation multiples.
It's been a fun ride (I've owned Apple for precisely a decade), but it's now time to turn my attention to a newer model.