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Why Jim Chanos Thinks Apple Is an Ultimate Value Stock


Nov. 20 2020, Updated 5:04 p.m. ET

Jim Chanos on Apple

Jim Chanos is well known for his shorting strategy. He generally shorts a stock when the company’s revenue is going down and the stock is trading at higher earnings multiples or when the stock’s fundamentals aren’t good.

However, he said that he is long on Apple (AAPL) because he thinks Apple is a value stock and trading at a cheaper valuation. David Einhorn, president of Greenlight Capital, also said at the 2016 Great Investors’ Best Ideas (or GIBI) investment symposium in Dallas on October 18, 2016, that Apple is absolutely cheap.

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The US (QQQ) (SPY) technology giant reported its 4Q16 results on October 25, 2016. It announced revenue of $46.9 billion, net income of $9 billion, and earnings per share (or EPS) of $1.68. However, its revenue fell on a yearly basis by 9%. Its sales fell 30% in Greater China. Its lower iPhone sales also impacted its revenue. Read How Did Apple Perform in Fiscal 4Q16? to learn more. Earlier, we saw that with expectations that China’s (MCHI) (FXI) (YINN) slowdown will further affect Apple’s profit margin, billionaire investor Carl Icahn exited a huge position in Apple, which dragged down Apple’s stock prices.

Apple is now increasing shareholder value with a $250 billion share buyback program. Read How Is Apple Increasing Shareholder Value? to learn more. The company is growing its global (ACWI) (VTI) customer base, and increasing its focus on service will likely drive the company’s growth.

Apple’s performance

Apple (AAPL) is currently trading at $112. Its 52-week high is $123.82 and 52-week low is $89.47. It’s currently trading at a price-to-earnings multiple of 13.50x. On a year-to-date basis, the stock has returned 6.4%. Over the two-year period, the stock returned 3.2%. Over the five-year period, the stock returned 108%.

Currently, the stock is trading 5.2% above its 100-day moving average and 3.2% below its 20-day moving average. On August 4, 2016, its 20-day moving average crossed its 100-day moving average in an upward direction. Technically, when short-term moving averages cross long-term moving averages in an upward direction, it suggests upward movement.

You may be interested to read Jeffrey Gundlach Advises Investors to Be Defensive.


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