Tags: Kass | Apple | buy | oversold

Hedge Fund Manager Kass: Apple Is Now a Buy

By Dan Weil   |   Tuesday, 13 Nov 2012 12:07 PM

When Apple shares hit a record high of $705 in September, hedge fund manager Doug Kass, president of Seabreeze Partners, called the stock overvalued.

Now that it has dropped 23 percent to $543, he thinks Apple is oversold.

“There’s no longer extreme investor ebullience,” Kass tells CNBC. “It is an iconic company with a fortress balance sheet, with core earnings of close to $50 a share that I can buy at net of cash in 2015, and at 6.5 times earnings.”

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

With shares at $540, the market is estimating earnings growth of 3 percent a year for Apple. And Kass views that rate as way too low.

The company’s revenue gained 27 percent in the quarter ended Sept. 29, and profit rose 24 percent.

Apple does have some product quality issues, Kass says. “But I don’t think you’re paying for it much anymore.”

Morningstar analyst Brian Colello also is bullish. He estimates Apple’s fair value at $770 and recommends buying it at $539.

“We expect Apple to remain a premium supplier of devices, even though rivals will clearly compete on price,” he writes on Morningstar.com

But there are plenty of other experts who think Apple will drop further. One of them is money manager Jeff Gundlach, CEO of DoubleLine Capital.

He thinks the stock will drop to $425 next year. “It just seems to me that it's an over-believed stock,” Gundlach tells CNBC.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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