Polen Capital, an investment management company, released its “Polen Focus Growth Strategy” third quarter 2024 investor letter. A copy of the letter can be downloaded here. The market turned volatile in the third quarter. In the third quarter, the fund returned 3.21% (gross) and 2.99% (net) compared to 3.19% for the Russell 1000 Growth Index and 5.89% for the S&P 500 Index. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Polen Focus Growth Strategy highlighted stocks like Apple Inc. (NASDAQ:AAPL), in the third quarter 2024 investor letter. Apple Inc. (NASDAQ:AAPL) is an American multinational company that designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories. The one-month return of Apple Inc. (NASDAQ:AAPL) was -4.11%, and its shares gained 19.63% of their value over the last 52 weeks. On November 11, 2024, Apple Inc. (NASDAQ:AAPL) stock closed at $224.23 per share with a market capitalization of $3.389 trillion.
Polen Focus Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
The largest relative detractors during the quarter were Apple Inc. (NASDAQ:AAPL), Airbnb, and Tesla (not owned). We added a new position in Apple during the period, which we discuss further in the following section. While Apple is a roughly average-sized position in Focus Growth, it is the largest holding in the Russell 1000 Growth Index, at over 12%, and the stock’s outperformance in the quarter weighed on relative results.
In the third quarter, we purchased new positions in Apple. We owned Apple from early 2009 through late 2016, a period characterized by the massive iPhone-driven growth phase propelling the company’s revenue and earnings to levels almost unseen previously. We moved on from the position in 2016 as we felt Apple had nearly fully penetrated the high end of the smartphone market, which by and large proved correct. Revenue growth has since compounded in the mid-to-high single digits, with earnings growth modestly higher, driven by heavy share buybacks. In the last two years, the company’s revenue and earnings growth has slowed to essentially 0%.
Apple can now upgrade Siri to the true helpful digital assistance consumers hoped it would be all along. Not to mention, the new operating system brings useful new features to not only Apple apps and services but also seamlessly across third-party apps. We believe this means a multi-year upgrade cycle is coming for iPhones that will be unveiled later in 2024 and into 2025. The elongation of the iPhone replacement cycle over the last few years is likely to stop or even reverse, pulling forward stronger revenue, earnings, and free cashflow growth for Apple over the next few years. We expect this to not only accelerate iPhone volume growth but also likely a product mix shifting to higher-priced, higher-margin iPhones. We also expect the AI functionality to be more impactful with bigger screens, processing, and memory. With consumer budgets getting tighter, we feel the new Apple phones with GenAI functionality will become a top priority for consumers versus other areas of spend, which we expect could give a safety-like quality to the acceleration. While the company’s valuation at just under 30x forward earnings is not cheap, we feel the earnings acceleration will allow Apple to generate at least double-digit returns (possibly even mid-teens) over the next few years, earning its place in our Focus Growth Portfolio.”
A busy sidewalk filled with people using Apple devices like iPhones, iPads and Apple Watches.
Apple Inc. (NASDAQ:AAPL) is in 9th position on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 184 hedge fund portfolios held Apple Inc. (NASDAQ:AAPL) at the end of the second quarter which was 150 in the previous quarter. In the September quarter Apple Inc. (NASDAQ:AAPL) delivered $94.9 billion in revenues, up 6% from a year ago. While we acknowledge the potential of Apple Inc. (NASDAQ:AAPL) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Apple Inc. (NASDAQ:AAPL) and shared AI news and ratings investors should not miss. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.