Wed, 7 Aug 2013
The tech giant is lacking a high-impact product that would bring its shares back to the peak prices of 2012, says Marsico Capital CEO Tom Marsico.
Karin Anderson: One last stock that would be great to talk would be Apple. It was the number-one stock for you for a long time, but interestingly, you started selling that last August. Talk about your rationale for the sale, and is it now interesting at these valuation levels?
Tom Marsico: When the stock was trading over $600, we thought that the geographic growth rate of the smartphone business at the high-end would slow and that Apple would finally come to meet with the penetration issue. As other companies caught up, as Samsung or HTC caught up with their smartphones, the differentiating aspects of the iPhone were being mitigated, and these lower-cost alternatives, the Android platform in particular, were causing a lot of pressure and will [continue to] cause a lot of pressure on Apple.
The innovation also seemed to have slowed. With the unfortunate death of [former Apple CEO] Steve Jobs, there was always a question about innovation moving forward. It remains to be seen if they can innovate from here, but we did look at a couple of different areas. We looked at Apple TV. We looked at the new watch product that's being discussed. Frankly, we can't come up with a gross profit dollar generator similar to the iPhone that has that big of market opportunity.
We think that that Apple will be a slow-growing company here. If they continue with the innovation, they can maintain their position with a large market category. We think they've done a tremendous job in executing their existing plan with the tablets, with the iPod, with the Macs, and with the iPhone. But we just don't see that major impactful product right now.
We wouldn't be surprised if they went more into the media area to augment their tremendous market share that they have in the smartphone area. This would be a logical extension. We've talked to the company about a decision to move into this area. They haven't shown any inclination to, but obviously that would be much more of a blue-sky opportunity. So, we would take a look at the stock if some of those things were transpiring. There might be a trade in Apple here. It dipped below $400; it's currently trading around $450. But to see it back at $600, it's a little bit difficult to see that occurring in the near term.
Anderson: All right, Tom, thank you so much for sharing your insights with us.
Marsico: Thank you. Thanks for having me here.