Up 75% in price since January, it’s been quite a year so far for anyone owning Apple (LSE: APPL) shares. Had you invested back in mid-March, you’d have already more than doubled your money.
Only a week or so after being the first US company to pass the $2tn mark, Apple’s value has now increased to almost $2.3tn. To put this in perspective, the Cupertino-based giant is now worth more than all the companies in FTSE 100 combined.
With this in mind, does avoiding the UK’s top tier and buying the iPhone maker’s shares instead make sense? Momentum-jockeys would say so. I don’t think the answer is quite so straightforward.
Apple shares: worth buying now?
Sure, there are a number of reasons to think Apple’s shares could go even higher.
For one, it doesn’t look like the coronavirus will be leaving us anytime soon. This being the case, we can probably expect more home-working — and subsequent demand for Apple’s products and devices — in the months ahead. Speaking of which, the rumour mill suggests we’ll see new iPhone, Apple Watch, iPad, Airpods and MacBook Pro launches before the end of 2020.
Aside from this, you have the coveted brand (ranked the third most-valuable in the world back in January) and ‘sticky’ products. Once you’ve entered the company’s ecosystem, it’s hard to leave. No wonder Warren Buffett is a big holder of Apple shares given his preference for companies with strong ‘economic moats’.
In sharp contrast, the FTSE 100 contains lots of stocks no one is chomping at the bit to own.
What’s so bad about the FTSE 100?
It’s to be expected that an index based on size rather than quality is bound to include a few duds. Nevertheless, the fact remains that only a proportion of the index are truly great businesses based on their ability to compound investors’ money. For every Halma, you have a battered bank, oil company or tobacco stock with limited growth propsects. For every Rightmove, you have a company with a truckload of debt. While some members have resumed dividends, many are still to do so.
Then again, I do think parts of the FTSE 100 offer better value compared to Apple shares at the moment. While the coronavirus has savaged sales, premium spirit maker Diageo and luxury fashion brand Burberry look great contrarian buys. This is unless you think the pandemic has completely altered our drinking habits and desire to show status.
Taking the above into consideration, I don’t think the choice between investing in Apple shares or the FTSE 100 is ‘obvious’.
Here’s what I’d do
If buying Apple shares while they’re ‘hot’ feels like too much of a gamble at present, you could always buy a fund that has a significant holding in the company instead. An example of this would be Polar Capital Technology Trust.
In addition to having 9.6% of its assets invested in the company at the end of July, Polar also has holdings in titans such as Microsoft, Alphabet (Google) and Amazon. Naturally, this won’t protect you from another market crash. However, knowing your money is spread around other companies should help calm your nerves.
With any remaining money, I’d be inclined to grab whatever quality you can find in the FTSE 100, especially if it’s trading on a bargain valuation.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers owns shares of Burberry. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Amazon, Apple, and Microsoft. The Motley Fool UK has recommended Burberry, Diageo, Halma, and Rightmove and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.