The One Stock Top Managers Are Gushing Over

Each quarter, we take a look at the recent transactions of some of the top money managers around today--who we call our Ultimate Stock-Pickers. Last quarter, one stock was a high-conviction purchase for five of our favorite managers. What’s considered a high-conviction purchase? A high-conviction purchase is one that makes a meaningful addition to a portfolio, as measured by the size of the purchase in relation to the size of the portfolio.

The managers at Vanguard Dividend Growth (VPMCX), American Funds American Mutual (AMRMX), Columbia Dividend Income (LBSAX), Parnassus Core Equity (PRBLX), and T. Rowe Price Blue Chip Growth (TRBCX) all made meaningful purchases of Apple (AAPL) last quarter.

At Morningstar, we think Apple has carved out a narrow economic moat, and we think the moat is stable. Apple’s competitive advantage stems from its ability to package hardware, software, services, and third-party applications into sleek, intuitive, and appealing devices. This expertise enables the firm to capture a premium on its hardware, unlike most of its peers. However, given the short product cycles of Apple’s products and army of firms targeting its dominance, we do not believe Apple has a wide economic moat.

We recently raised our fair value estimate to $85 per share from $71, as we incorporated a stronger near-term outlook for the Mac and iPad segments due to ongoing work- and learning-from-home dynamics. Nonetheless, we think shares are currently overvalued, as we think recent growth trends could be unsustainable as we enter 2021.

Associate analyst Malik Ahmed Khan and sector strategist Abhinav Davuluri provided the research behind this segment.