Apple stock still has plenty of room to run

The years of mega-growth are gone forever for Apple (Nasdaq: AAPL), but it’s still poised to reward long-term shareholders.

For one thing, along with a new, stylish AppleWatch and a mobile payments system, the company recently announced its highly anticipated iPhone 6 (and 6 Plus), with bigger screens and more power than predecessors. With its various upcoming new products, as well as upgrades of products such as iPad tablets, many investors are expecting Apple to enter a new phase of growth and innovation.

The iPhone 6 is likely to be the biggest growth driver by far, as about half of American iPhone users today are still using the 4 or 4S (and it’s 69 percent in China). Emerging markets such as China and India hold vast promise for Apple and are critical opportunities, but it has been facing tough competition outside U.S. borders, where its iOS operating system has been losing market share in recent years.

Still, Apple’s stock price seems low enough to compensate for its risks with a solid margin of safety. It recently sported a price-to-earnings (P/E) ratio of 17, which is rather low for a briskly growing company. Its dividend yield was recently 2 percent, and the company has been aggressively buying back shares, too, which boosts the value of remaining shares. ( The Motley Fool owns shares of Apple and its newsletters have recommended it.)

Ask the Fool

Q: I see that RadioShack stock has surged lately. I know the company has been struggling, but should I buy shares now? Last I looked, its shares were still less than $2 apiece. – P.D., Archer, Florida

A: You’re under a common misconception, that a seemingly low price means a stock is “cheap” and a bargain. It’s true that RadioShack has been going through some tough times, but a stock price jump doesn’t mean it’s out of the woods yet (and stocks trading for less than $5 per share are typically extra-risky “penny stocks”).

RadioShack’s stock more than doubled in a single week recently, on news that the company might get some much-needed financing from a hedge fund. If that happens, it’s good news for the company, but that doesn’t solve all of RadioShack’s problems. It’s carrying a lot of debt, for example, while burning more cash than it generates. Rumors are also not great reasons on which to base investment decisions.

Q: What education and training are required for stockbrokers? – K.W., Tecumseh, Michigan

A: A college education generally isn’t required, but a bachelor’s degree is common among stockbrokers. They must pass the “Series 7” licensing examination, though, and sometimes other exams, such as Series 63 and Series 65. Licensed brokers can advise you, solicit business from you and execute transactions on your behalf.

Remember, though, that these exams don’t measure a broker’s skill at identifying great investments. Worse still, brokers don’t have to abide by the fiduciary standard that applies to investment advisers, requiring that recommendations be in your best interest. Instead, they just have to offer “suitable” (and possibly high-cost) investments. The Securities and Exchange Commission (SEC) has been looking into changing that.

My dumbest investment

My most recent flub was chasing the stock of beverage carbonation system maker SodaStream as it dropped. I temporarily lost any sense of a plan and bought more on the way down three times because I was sure it was a buying opportunity. I sold out for about an average 25 percentage loss, putting quite a damper on other recent gains. Still, it was a good, although painful, lesson for me. – Karl, online

The Fool responds: You were “averaging down” – buying shares of a falling stock and delighting that you’re gaining more shares at lower prices, thereby lowering your average cost basis. This strategy can pay off well, but it can also end badly.

Remember that when stocks fall, they usually do so for a reason. Before buying any more shares in such a situation, you should do enough research to be very confident that any problems are fleeting ones and that the company seems likely to recover and prosper. Never hang on just to get your money back. You can always move the money left in the stock into a more promising one.