Legendary investor Warren Buffett grabbed the attention of a myriad of financial media outlets [recently] when he raised his stake in Apple Inc. (NasdaqGS:AAPL), even though he typically stays away from tech.
Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B) upped its stake in Apple by 3%, for a total of 134 million outstanding shares. The holding company is now the fifth-largest owner of Apple shares.
The answer is simple: Buffett recognizes Apple for its uncanny ability to stay miles ahead of its competitors.
Money Morning Chief Investment Strategist Keith Fitz-Gerald has long held the same view of the company – and he’s set an ambitious price target as a result.
Keith sees Apple valued at $1 trillion by the end of this year.
Here’s why he’s so bullish on the company – and why you don’t want to be left behind…
Analysts Are Missing the Big Picture
Keith is viewing Apple through the same lens as Buffett – as more than just a tech company.
“Millions of investors think of Apple as a device company,” said Keith. “In reality, Apple hasn’t been that company in years.”
The key here – according to Keith – is that investors are focusing too much on Apple’s “things.”
“Eventually, [Apple is] going to run out of customers who can drop $1,000 on a phone or iPad or a fancy watch,” he said.
The pundits will take that as a sign that Apple’s in trouble, but Keith knows that the real wealth is in Apple’s strategy.
“A company’s business strategy is where the real value-add comes in. It’s why Apple is what it is today – and why FitBit Inc. (NYSE:FIT) and GoPro Inc. (NasdaqGS:GPRO), for example, struggle to remain relevant in hotly competitive markets that are rapidly leaving both behind,” said Keith back in October.
The importance of strategy is why Keith continually heeds us to pay attention to the CEOs as part of the investing process.
Apple CEO Tim Cook’s recent spending habits caught Keith’s eye earlier this year, when he noticed Cook was dishing out millions of dollars into research. “I think he’s going to make the pivot very shortly into medical devices,” said Keith.
“I’ve talked to medical providers, doctors, hospital management, insurance company executives, and more,” he added. “And I’m more convinced than ever that I am correct.”
He was.
On November 30, Apple launched an app that studies users’ heart rates through the Apple Watch. Called the Apple Heart Study App, it detects irregularities and sends notifications to users who may be suffering from atrial fibrillation (AFib) – potentially saving countless lives.
Apple’s move into this sector is brilliant – but it still needs a way to subsidize the technology so that customers who couldn’t otherwise afford an Apple product are still brought into Apple’s orbit.
“To me, that’s having one or more Apple devices recognized as medical devices,” said Keith. “When this happens, doctors all over the world could prescribe Apple products and insurance companies would pay for them. Revenue would skyrocket, and profit margins could double.”
Keith has a price target of $194 for the company before the end of the year, about 14% higher than its current price.
But if Apple successfully becomes a household name in the world of medical devices, Keith sees the stock headed higher – much higher: “My $200 price target just became a $400 price target,” he said. “Not immediately, of course, but longer term, when this idea has matured.”
“The healthcare sector is a gold mine of profit potential, and Apple’s pivot is just the tip of the iceberg,” said Keith.
— Total Wealth Staff
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Source: Total Wealth Research