Why Everyone Should Own Apple But Buy These 2 Fast-Growing Blue-Chip Bargains Today (2024)

We all dream of retiring in safety and splendor and owning the world's best blue-chips for the long-term is the easiest way to make this happen.

Apple Total Returns Since 1986

Apple (AAPL) is a classic example of this, having delivered remarkable Buffett-like 24% annual returns since 1986.

That means $1,000 invested in Apple 35 years ago is now worth over $2.1 million, or $827,000 adjusted for inflation.

Of course, back in 1986, it wasn't clear that Apple would become the world's most valuable company, after nearly going bankrupt and reinventing itself several times.

Along the way to those unfathomable riches, Apple investors had to endure not one, but two 80% crashes, as well as a 57% crash during the Great Recession.

And today Apple is highly overvalued and thus investors must be prepared for another potential long stretch of disappointing returns.

AAPL 2024 Consensus Return Potential

That's because, after blockbuster 71% growth in 2021, Apple is expected to grow just 6.4% annually through 2024 and 8.4% annually through 2027.

Even if you personally think that Apple's 26.5 forward PE is justifiable by its stronger focus on subscription revenue, there is simply no way, other than continued multiple expansion, that Apple can continue delivering the incredible 61% annual returns of the last three years.

• not without risking the largest crash in its history when the bubble bursts

But I promised to tell you how Apple can help you retire rich, and stay rich in retirement. And there are three reasons it can in fact still do that.

In fact, if you own Apple today, then over the long-term Apple is likely to help you retire in safety and splendor.

So let me show you why Apple is on my correction watchlist, and as close to a "must own" dividend growth blue-chip as exists on Wall Street.

I'll also show you why Alphabet (GOOG) and Carlisle (CSL) represent two fast-growing superior blue-chip alternatives to Apple right now.

• equal in fundamental quality and safety
• equal (or better) long-term growth prospects
• 20 to 25X higher 5-year risk-adjusted expected returns

GOOG and CSL are two blue-chips I just bought during the Russian invasion correction, and still represent two rich-retirement blue-chip opportunities that might be just what your portfolio is looking for.

Apple Can Make You Rich Because It's One Of The World's Best Companies

The Dividend King's overall quality scores are based on a 237 point model that includes:

• dividend safety

• balance sheet strength

• credit ratings

• credit default swap medium-term bankruptcy risk data

• short and long-term bankruptcy risk

• accounting and corporate fraud risk

• profitability and business model

• growth consensus estimates

• historical earnings growth rates

• historical cash flow growth rates

• historical dividend growth rates

• historical sales growth rates

• cost of capital

• long-term risk-management scores from MSCI, Morningstar, FactSet, S&P, Reuters'/Refinitiv and Just Capital

• management quality

• dividend friendly corporate culture/income dependability

• long-term total returns (a Ben Graham sign of quality)

• analyst consensus long-term return potential

It actually includes over 1,000 metrics if you count everything factored in by 12 rating agencies we use to assess fundamental risk.

• credit and risk management ratings make up 41% of the DK safety and quality model

• dividend/balance sheet/risk ratings make up 82% of the DK safety and quality model

How do we know that our safety and quality model works well?

During the two worst recessions in 75 years, our safety model predicted 87% of blue-chip dividend cuts during the ultimate baptism by fire for any dividend safety model.

How does AAPL score on one of the world's most comprehensive safety models?

AAPL Dividend Safety

Long-Term Dependability

Overall Quality

AAPL: The 35th Highest Quality Master List Company (Out of 509) = 93rd Percentile

The DK 500 Master List includes the world's highest quality companies including:

• All dividend champions

• All dividend aristocrats

• All dividend kings

• All global aristocrats (such as BTI, ENB, and NVS)

• All 13/13 Ultra Swans (as close to perfect quality as exists on Wall Street)

• 47 of the world's best growth stocks (on its way to 50)

AAPL's 92% quality score means its similar in quality to such blue-chips as

• Alphabet
• 3M (MMM) - dividend king
• Lowe's (LOW) - dividend king
• Amazon (AMZN)
• Cummins (CMI)
• Dover (DOV) - dividend king
• Stanley Black & Decker (SWK) - dividend king
• Adobe (ADBE)
• Automatic Data Processing (ADP) - dividend aristocrat
• Carlisle Companies - dividend champion
• NVIDIA (NVDA)

Even among the most elite companies on earth, AAPL is higher quality than 93% of them.

Why? Because of its amazing fundamentals.

Apple Can Make You Rich Because Its Fundamentals Make It A Fortress

Let's start with Apple's fundamental risk, the risk of it going bankrupt and thus the stock to zero.

(Sources: S&P, Moody's)

S&P and Moody's estimate a 1 in 556 chance anyone buying Apple today will suffer a total loss.

Why?

AAPL Leverage Consensus Forecast

(Source: FactSet Research Terminal)

Because few companies on earth have a balance sheet as strong as Apple's.

AAPL Balance Sheet Consensus Forecast

(Source: FactSet Research Terminal)

Apple's cash position is expected to grow at a torrid pace in the coming years, rising to a staggering $729 billion by 2027.

Even more impressive, its net debt, when including accounts receivable, is expected to hit -$771 billion by 2027.

And while its cash flows aren't expected to grow very quickly in the coming years, $193 billion in 2027 EBITDA and $180 billion in operating income is absolutely staggering.

AAPL Bond Profile

• $63.9 billion in liquidity
• well staggered debt maturities (little problem refinancing maturing bonds)
• 100% unsecured bonds (maximum financial flexibility)
• bond investors so confident in AAPL's business they are willing to lend to it for almost 40 years at 3.3%
• the average borrowing cost is 2.24%
• 0% after inflation vs 54% cash returns on invested capital
• 54% net investment spread is one of the highest in the history of capitalism

AAPL Credit Default Swaps: Bond Market's Real-Time Fundamental Risk Assessment

Credit default swaps are insurance policies bond investors take out against potential defaults.

• a real-time fundamental risk-assessment
• AAPL's CDS are consistent with its credit rating
• fundamental risk has fallen significantly in recent months
• bond investors, rating agencies, management, and analysts agree that AAPL's thesis remains intact

AAPL Profitability: Wall Street's Favorite Quality Proxy

Historically AAPL's profitability is in the top 4% of its peers.

AAPL 12-Month Profitability VS Peers

(Source: Gurufocus Premium)

In the past year, just 41 tech hardware companies on earth had profitability better than Apple's.

Apple's wide and stable moat is confirmed by steadily rising or stable industry-leading profitability over the last decade.

In fact, its cash returns on invested capital of 54% are in the top 1% of all companies on earth.

AAPL Profit Margin Consensus Forecast

(Source: FactSet Research Terminal)

5% FCF margins are a good rule of thumb for a good company. Apple's free cash flow margins are expected to modestly increase to almost 30% in the next few years.

Its other margins are expected to remain stable including return on capital.

• pre-tax profit/the money it takes to run the business (operating capital)
• Joel Greenblatt's gold standard proxy for quality and moatinessAccording to one of the greatest investors in history, AAPL is about 30X higher quality than its median peer and about 26X higher quality than the average S&P 500 company.

And Apple's ROC has been trending higher at a rate of 4.5% annually over the last 27 years.

• numerous pivots to new business models and yet Apple's quality and profitability keep going up over time

And Apple's incredible profitability being maintained in the coming years is even more impressive when we consider how much this company is investing in growth and innovation.

AAPL Growth Spending Consensus Forecast

(Source: FactSet Research Terminal)

In 2021 Apple spent $57 billion on growth. By 2027 that's expected to reach $83 billion.

• Apple's 2027 growth spending alone is expected to be almost as large as the economy of Slovakia
• if Apple's 2027 growth spending were its own country it would be the 65th large economy on earth

That includes $41 billion in R&D that's growing at 10% annually. What is Apple potentially doing spending $230 billion on R&D through 2027 and $507 billion on total growth?

• advanced medical capabilities for iOS
• a potential Apple car
• new products we haven't even heard rumors of

AAPL Medium-Term Consensus Forecast

(Source: FactSet Research Terminal)

Apple's growth in the next few years is going to be OK, but hardly exceptional.

The most impressive thing about its top and bottom lines will be the staggering sizes.

No company in history has ever generated over $100 billion in free cash flow in a single year and that's what Apple is expected to do in 2022.

And by 2027 the only company generating more free cash flow than Apple is expected to be Amazon (AMZN).

• AMZN 2027 consensus free cash flow: $184.3 billion

What about Apple's dividend which management has said will be raised every year, which puts Apple on track to become a dividend aristocrat in 2037?

AAPL Dividend Growth Consensus Forecast

(Source: FactSet Research Terminal)

60% is the payout ratio credit rating agencies consider safe for this industry.

Apple's epic buybacks are expected to help drive 13% FCF/share growth through 2024 and thanks to 7% dividend growth, bring the payout ratio down to 10% in 2027.

Apple's post-dividend free cash flow is expected to be $822 billion over the next few years.

That's enough to pay off all its debt...7 times.

Or buy back 30% of its stock at current valuations.

(Source: FactSet Research Terminal)

No company in history has bought back more stock than Apple, and I personally think those 2022 through 2024 estimates are going to prove conservative.

• Apple's consensus free cash flows in 2022 and 2023 and 2024 are $351 billion
• and analysts expect just $162 billion in buybacks
• $50.6 billion on dividends
• that's a total of $213 billion in capital return
• $138 billion left over would merely add to Apple's mountain of cash

Since 2013 Apple has bought back 38% of its net stock, even with tens of billions in stock-based compensation.

That's 6.6% of its stock annually.

And since free cash flow is what's left over after running the business, paying taxes, and investing in future growth, there isn't much reason that Apple couldn't buy back 30% of its shares through 2027.

• assuming it grows as expected
• and assuming the current valuation persists

Basically, Apple's fundamentals are second only to Amazon's when it comes to sheer size and magnitude.

And while slower growth in the next few years is likely to result in disappointed investors, spoiled by one of the best bull market for any stock in US history, in the long-term analysts still think Apple can make you rich.

Apple Can Make You Rich Because Its Long-Term Growth Prospects Remain Excellent

• 11.6% to 14.9% CAGR long-term growth consensus range on Apple
• 14.5% is the median estimate from all 44 analysts who cover it on Wall Street
• smoothing for outliers historical analyst margins of error are 10% to the downside and 20% to the upside
• 10% to 18% historical margin-of-error adjusted growth consensus range

What does this mean for long-term investors in Apple?

(Source: Morningstar, FactSet, Ycharts)

That if Apple grows as expected and you hold it for decades, you could double your money every five years.

That's more than the Nasdaq, S&P, aristocrats, and every major investment strategy on Wall Street.

Inflation-Adjusted Total Return Forecast: $1,000 Initial Investment

• bond market expects 2.24% inflation over the next 30 years

(Source: DK Research Terminal, FactSet)

Apple could indeed still be a glorious long-term investment, allowing you to retire in safety and splendor, and possibly run circles around the S&P and Nasdaq.

(Source: DK Research Terminal, FactSet)

So does that mean that Apple is a great buy today? NO.

AAPL 2027 Consensus Return Potential

Apple's historical fair value PE keeps rising over time but is currently at 18.2.

• during the Tim Cook/hyper buyback era
• and the rise of Apple's subscription business

If Apple grows as expected through 2027, a more modest 8.4% according to analysts, then investors might see zero total returns over the next five years.

• a lost half-decade for the stock

AAPL Investment Decision Score

Apple's margin of safety is so poor, and its growth prospects so modest in the next few years, that the 13% overvalued S&P 500 has 11X higher risk-adjusted expected returns.

Or to put it another way, anyone buying Apple today is ignoring the fact that analysts expect much slower growth in the medium-term, not to mention the risk profile.

Risk Profile: What Today's Apple Valuation Isn't Pricing In

There are no risk-free companies and no company is right for everyone. You have to be comfortable with the fundamental risk profile.

AAPL's Risk Profile Summary

• product cyclicality: iPhone still generates 52% of sales and upgrade cycles are beyond Apple's control
• economic cyclicality: Apple's products are luxury goods and demand could fall in a recession
• disruption risk: how consumers consume and use data in the future might be very different than they do now
• regulatory risk (domestically and internationally): anti-trust lawsuits
• M&A risk: AAPL frequently makes tuck-in acquisitions and this might be blocked by regulators in the future
• margin compression risk: margins are sky-high and input costs are trending higher, not lower
• supply chain disruption risk
• labor retention risk (tightest job market in over 50 years and finance is a high paying industry)
• currency risk

How do we quantify, monitor, and track such a complex risk profile? By doing what big institutions do.

Material Financial ESG Risk Analysis: How Large Institutions Measure Total Risk

• 4 Things You Need To Know To Profit From ESG Investing
• What Investors Need To Know About Company Long-Term Risk Management (Video)

Here is a special report that outlines the most important aspects of understanding long-term ESG financial risks for your investments.

• ESG is NOT "political or personal ethics based investing"
• it's total long-term risk management analysis

ESG is just normal risk by another name." Simon MacMahon, head of ESG and corporate governance research, Sustainalytics" - Morningstar

ESG factors are taken into consideration, alongside all other credit factors, when we consider they are relevant to and have or may have a material influence on creditworthiness." - S&P

ESG is a measure of risk, not of ethics, political correctness, or personal opinion.

S&P, Fitch, Moody's, DBRS (Canadian rating agency), AMBest (insurance rating agency), R&I Credit Rating (Japanese rating agency), and the Japan Credit Rating Agency have been using ESG models in their credit ratings for decades.

• credit and risk management ratings make up 41% of the DK safety and quality model
• dividend/balance sheet/risk ratings make up 82% of the DK safety and quality model

Dividend Aristocrats: 67th Industry Percentile On Risk Management (Above-Average, Medium Risk)

AAPL Long-Term Risk Management Consensus

(Sources: Morningstar, Reuters', S&P, JustCapital, FactSet Research)

AAPL's Long-Term Risk Management Is The 83rd Best In The Master List (83rd Percentile)

AAPL's risk-management consensus is in the top 20% of the world's highest quality companies and similar to that of such other companies as

• Bank of Montreal (BMO)
• Visa (V)
• Target (TGT) - dividend aristocrat
• Automatic Data Processing (ADP) - dividend aristocrat
• Honeywell (HON)
• Colgate-Palmolive (CL) - dividend king
• Paypal (PYPL)

The bottom line is that all companies have risks, but AAPL is very good at managing theirs.

How We Monitor AAPL's Risk Profile

• 44 analysts
• 2 credit rating agencies
• 7 total risk rating agencies
• 51 experts who collectively know this business better than anyone other than management
• and the bond market for real-time fundamental risk analysis

When the facts change, I change my mind. What do you do sir?" - John Maynard Keynes

There are no sacred cows at iREIT or Dividend Kings. Wherever the fundamentals lead we always follow. That's the essence of disciplined financial science, the math retiring rich and staying rich in retirement.

Why Alphabet Is A Better Long-Term Growth Blue-Chip Investment Than Apple Right Now

Full Deep Dive Analysis (Safety, Quality, Fundamentals, Valuation, Return Potential, Risk Profile)

• Buy Alphabet Now Before Everyone Else Does

Reasons To Potentially Buy GOOG

• 91% low-risk 13/13 Ultra SWAN quality tech giant
• 15% historically undervalued, potentially strong buy
• Fair value: $3,190.74
• 23.0 X earnings vs 25.5 to 27.5 historical
• AA+ stable credit rating = 0.29% 30-year bankruptcy risk (same as Apple's)
• Risk management consensus 70th industry percentile = good
• 11% to 17% CAGR margin-of-error growth consensus range
• 14.2% CAGR median growth consensus (vs 14.5% AAPL)
• 5-year consensus total return potential range: 13% to 19% CAGR vs -4% to 3% for AAPL
• 5-year consensus total return potential (base case): 15% CAGR vs 1% for AAPL
• 12-month total return consensus: 29%
• Fundamentally justified 12-month total returns: 18%

GOOG's 5-year consensus return potential is about 15X better than Apple's.

(Source: Morningstar, FactSet, YCharts)

GOOG has similar long-term return potential to Apple, but far superior short to medium-term return potential.

GOOG 2024 Consensus Total Return Potential

If GOOG grows as expected it could deliver 15% annual returns over the next three years, the same long-term return potential Apple's current valuation could require 10+ years to achieve.

GOOG 2027 Consensus Total Return Potential

For anyone comfortable with GOOG's risk profile, it's as close to a perfect growth blue-chip investment as you can make in today's overvalued market.

• same fundamental risk as Apple
• but with 25X better risk-adjusted expected returns

Why Carlisle Is A Hyper-Growth Ultra SWAN Dividend Aristocrat You'll Want To Own

Full Deep Dive Analysis (Safety, Quality, Fundamentals, Valuation, Return Potential, Risk Profile)

• Carlisle Is Hyper-Growth Dividend Aristocrat Profiting From A $112 Trillion Megatrend

Reasons To Potentially Buy CSL

• 96% quality low-risk 13/13 Ultra SWAN quality dividend champion
• 16th highest quality company on the Master List (97th percentile)
• very safe 0.9% yield (95% safety score)
• 45-year dividend growth streak
• 22% undervalued (potential strong buy)
• Fair Value: $295.12
• 15.8X earnings vs 18 to 21.5X historical
• BBB stable outlook credit rating = 7.5% 30-year bankruptcy risk
• risk management consensus 60th industry percentile = Above-Average
• 12% to 18% CAGR margin-of-error growth consensus range
• 15% CAGR median growth consensus
• $112 trillion global infrastructure megatrend could sustain such growth for decades
• 5-year consensus total return potential: 9% to 16% CAGR
• base-case 5-year consensus return potential: 13% CAGR
• consensus 12-month total return forecast: 26%
• Fundamentally Justified 12-Month Returns: 28% CAGR

(Source: Morningstar, FactSet, Ycharts)

Analysts expect CSL to deliver superior long-term returns to any major investment strategy, even the Nasdaq. 15.9% CAGR consensus return potential is similar to the company's returns over the last 33 years.

CSL Total Returns Since 1988

33 years in which CSL has delivered 50X inflation-adjusted returns or 3.6X more than the S&P 500.

What about CSL's low 0.9% yield?

CSL Is A Dividend Grower Not A Shower

(Source: Portfolio Visualizer Premium)

CSL 2023 Consensus Total Return Potential

If CSL grows as expected and returns to historical fair value by 2023 that's potentially 41% total returns or 21% annually.

• Buffett-like return potential from this blue-chip bargain hiding in plain sight

CSL 2027 Consensus Total Return Potential

If CSL grows as expected and returns to historical mid-range fair value

• then 105% total returns or 13% CAGR = 13X better than Apple's
• about 2.5X more than the S&P 500 consensus

CSL Investment Decision Score

For anyone comfortable with its risk profile, CSL is a potentially satisfactory investment today compared to the S&P.

• 22% discount vs 14% market premium
• far superior fundamental quality and safety
• about 2X the risk-adjusted expected returns of the S&P 500

CSL offers about 20X the risk-adjusted expected returns of Apple over the next five years.

Bottom Line: Apple Can Make You Rich, But Alphabet And Carlisle Can Make You Even Richer

Apple is a wonderful company, but trading at a highly speculative price.

Is it POSSIBLE that one of the world's greatest companies can keep trading at 21 EV/EBITDA and 26X forward earnings?

Sure, the new business model offers more consistent cash flow than a pure hardware maker and thus Apple's long-term historical fair value multiples are likely to be higher in the future.

• GOOG growing at similar rates as Apple has traded at 26.5X earnings and Apple MIGHT do so in the future as well

But even if Apple's current multiples represent the new fair value, the fact remains that over the next few years analysts expect 8.4% annual growth.

• best case scenario 8.9% annual returns over 5 years
• 0.5% risk-adjusted expected returns

During a future correction, Apple will return to fair value, though we don't know when this will be.

I look forward to buying it at fair value or better, but I'm not willing to recommend one of the world's greatest companies at such speculative valuations.

• which are literally pricing in five years worth of growth right now

In contrast, Alphabet and Carlisle represent companies with similar quality, safety, and dependability as Apple, ut with far superior valuations.

• GOOG has 14.2% long-term return potential vs Apple's 15%
• CSL has 15.9% long-term return potential which is more than Apple's

Today GOOG is about 15% undervalued and a potentially strong buy.

CSL is 21% undervalued and also a potentially strong buy.

Remember that it's always and forever a market of stocks, not a stock market.

Even with the market still overvalued, and many wonderful companies still trading at dangerously speculative valuations, glorious blue-chip bargains are always available if you know where to look.

Pure growth?

Hyper-growth dividend aristocrats?

Hyper-growth dividend kings?

Whatever your goal, time horizon, or risk profile the smart long-term investor never has to pray for luck, because he/she can always make their own.

Luck is what happens when preperation meets opportunity." - Roman philospher Seneca the younger

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