Apple remains an attractive investment

Apple (Nasdaq: AAPL) is one of the stocks our readers most often lament having sold way too soon. Well, it’s actually not too late to buy shares now, if you believe in the company’s ability to keep introducing exciting new offerings.

It’s hard not to believe in Apple, as it possesses the most valuable brand in the world, is sitting on more than $175 billion in cash and investments (as of the end of 2014), and has a wildly successful history of innovation. It has sold 700 million-plus iPhones, including 75 million in the last quarter alone, and its new offerings include the Apple Pay system and the Apple Watch, with some possibly big plans to enter and compete in the multitrillion-dollar auto industry and the cable TV industry, too.

Its war chest is a big plus, protecting it from an economic downturn and helping it keep competition at bay. It also means the company will have no problem continuing to pay and increase its dividend, which recently yielded 1.5 percent.

Apple has developed its line of products into an ecosystem where they’re all connected, making it hard for customers to switch to competitors. It’s also moving aggressively into promising regions abroad, such as China.

With a recent P/E ratio near 17 and a forward-looking one near 13, Apple is far from overpriced and worth consideration.

Ask the Fool

Q: How can I research the risks facing various companies? – K.W., Moville, Iowa

A: You’ll typically find most of a publicly traded American company’s risks disclosed by the company itself. Such companies are required to file annual “10-K” reports with the Securities and Exchange Commission (SEC). Accessible at websites such as finance.yahoo.com and the companies’ own websites, they detail a company’s financial and operational health and progress, and also address risks facing the business.

For example, Boeing’s 10-K for 2014 cites many risk factors the company faces, such as, “Our Commercial Airplanes business depends heavily on commercial airlines, and is subject to unique risks.” It explains: “Demand for our commercial aircraft is … influenced by airline profitability, availability of aircraft financing, world trade policies, government-to- government relations, technological changes, price and other competitive factors, fuel prices, terrorism, epidemics and environmental regulations.”

Some of many other risks include changes in levels of U.S. government defense spending and losses due to cost overruns on fixed-price contracts. Boeing, along with other multinational companies, cites regulatory changes and currency fluctuations as risks. In developing nations, the lack of relevant laws, or the presence of new and untested laws, can also be an issue.

Don’t let the risks listed in 10-Ks make you want to avoid investing in any company. Every company faces risks. They shouldn’t scare you away, but do consider them. Also, know that companies can manage many of their risks, such as via insurance, or by locking in currency rates or commodity prices via futures contracts.

Q: What’s an “uptick”? – D.T., Forty Fort, Pennsylvania

A: It’s when the last price for a stock or security is a bit higher than its price the previous time it traded.

My smartest investment

My best investment decision was a test I performed some years ago. I gave my broker $10,000 and trusted him to make good investments for me. I took another $10,000 and opened a brokerage account where I invested in stocks I chose myself, having learned of many of them from The Motley Fool.

My broker put my money in five mutual funds, and about a year later, that account was up 6.5 percent. Over the same period, I nearly doubled my money with the stocks I chose myself. After that, I decided to invest all my money on my own. – B.B., via email

The Fool responds: We do believe that individual investors can outperform Wall Street’s pros – most easily via a simple, inexpensive broad-market index fund, which outperforms most managed mutual funds.

Your experiment has a flaw, though, as it lasted only about a year. Over the short run, good stocks can fall and bad ones rise, and the market can swoon for a while. Over the very long run, the stock market has averaged close to 10 percent annually. It’s rare to double your money that quickly.