Maintaining stocks for eternity may seem prudent, reminiscent of Warren Buffett’s timeless strategy. I typically refrain from selling unless faced with an irretrievable loss. However, my substantial stake in Apple (NASDAQ: AAPL) beckons a review. The colossal growth of my Apple shares, now exceeding a decade-long tenure, has led me to ponder the necessity of scaling back. Here’s why I’m contemplating a partial divestment and devising an exit plan.
Is It Time to Scale Back?
Despite Apple reigning as my top investment by a significant margin, its current share in my diversified portfolio stands at a mere 3.5%. Contrastingly, the tech giant commands nearly 30% of my Roth IRA’s worth, tripling that of the account’s second-largest holding.
Buffett’s love for Apple echoes through Berkshire Hathaway, where it endures as the largest holding, commanding 42.9% of the investment portfolio. Nevertheless, even Buffett coursed a similar path, shedding 13% of his Apple shares last quarter and 1% in the fourth quarter of the preceding year.
Given Apple’s soaring valuation and decelerating growth, trading at over 30 times forward earnings raises concerns. This puts Apple’s metrics above the S&P 500 (22 times forward P/E) and the Nasdaq-100, which stands at 28.5 times.
With its revenue receding by 3% in the 2023 fiscal year and earnings per share registering a mere 0.3% uptick, Apple’s growth seems stagnant. This trend has lingered into the first two quarters of fiscal 2024. Despite this lethargy, prospects of resurgence linger. The unveiling of Apple Intelligence in the AI realm has the potential to bolster iPhone sales and financial performance.
Maximizing Gains with an Eye on Liquidation
Since the advent of Apple Intelligence, Apple’s stock price and valuation have skyrocketed. Consequently, I contemplate offloading some shares to capitalize on the fervor.
However, I’m cautious about divesting presently, as AI fever could propel shares further skyward. Instead, I’ve opted to initiate the writing of covered calls on a segment of my holdings. This options trading technique bears dual advantages:
- Income: By vending call options, I can accumulate premium income to diversify into alternative equities.
Options Trading Strategy on Apple Stock Unveiled
If Apple stock surges above the options strike price at expiration, shareholders can lock in a higher profit. Meanwhile, if shares hover near or below the strike price, investors have the option to roll over existing options or write new ones for additional income.
Engaging in call options on Apple stock presents a promising strategy. It allows investors to generate extra income while holding out for a significant increase in share value. Although capping the upside on covered shares to the strike price plus options premium, the approach offers unlimited growth potential on other Apple shares not covered by calls.
A Strategic Approach to Managing Apple Stock
Recognizing Apple’s status as a premier corporation, many intend to retain this investment for the long term. Despite this vision, with Apple composing a substantial portion of their Roth IRA due to its elevated valuation, some contemplate reducing their stake in the company. This can be achieved by writing call options on select shares, a strategic and patient move that may result in a higher sales price or supplementary income from a stock with a lofty valuation.
Is Apple a Wise Investment Currently?
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