Apple, Alphabet: Are They Value Stocks?

By Todd Rosenbluth, CFRA

Unlike products passively tracking an index-based value approach, active fund alternatives can hold stocks that appear attractively valued to living, breathing managers, regardless of their growth attributes. With growth stocks, such as Apple (AAPL) and Alphabet (GOOGL) leading many value constituents thus far in 2017 even following a pullback Friday, a flexible active approach has been rewarding.

AAPL is up nearly 29% in 2017, even after a Friday selloff. The tech heavyweight held its annual developers conference last week and CFRA equity analyst Angelo Zino views positively enhancements to iOS and a much smarter Siri. Zino thinks the most notable iOS updates announced were a redesigned App Store, new Map features – mall/airport floor plans and lane guidance — new camera features, and an augmented reality developer platform. AAPL also revealed a mostly internal refresh to MacBooks, a new 10.5 inch iPad Pro and HomePod, a new Siri-based home speaker system, at $349, which Zino expect to sell well given superior sound quality, despite being priced above peers.

Meanwhile, GOOGL is up 22% despite pulling back Friday. CFRA equity analyst Scott Kessler downgraded the stock to buy from strong buy in early June, but sees healthy sustainable growth, driven by mobile and YouTube. He also notes Alphabet has more emerging opportunities related to cloud and self-driving car and potential gains related to artificial intelligence and machine learning.

AAPL and GOOGL are constituents of the S&P 500 and Russell 1000 Growth indices, subsets of broader, well-known benchmarks used by active managers.

In ranking equity mutual funds, CFRA incorporates holdings-level analysis with traditional mutual fund attributes related to its relative performance record and costs. Some of this year’s outperforming large-cap value mutual funds are ranked favorably to CFRA in part because they hold appealing stocks such as AAPL and GOOGL.