Apple as a China Play

by | Apr 27, 2012 | General

Apple’s China business today is bigger than the entire company in 2007

Since the turn of the 21st century a smart portfolio owned what China needed and avoided what China made. That meant owning commodities and avoiding a long list of consumer products.

We believe that this investment theme is largely played out. The smart portfolio for the next ten years will take advantage of the growth in Asian consumer wealth. 

We’ve spent many hours looking for the best ways to tap into Asian spending and then this week Apple reported spectacular earnings. At the same time they reported their results in China and we discovered that we already own the best way to benefit from Asian growth.

Apple sold 5 times as many iPhones in China during the last quarter as it sold one year before. And keep in mind that the iPhone retails for $600 everywhere outside the US. It is only here that mobile operators subsidize the price in exchange for a two year contract.

It’s been thirty years since China began opening its market to US companies and most have China: Their products cannot be easily copied (Proctor and Gamble) or counterfeited been disappointed. Apple has one big advantage over all others who have tried selling goods in (Microsoft). 

China consumers were not one of our original reasons for owning Apple, but now that off-shore sales have reached 65% of the total it may be the primary catalyst for growth in the next three years.

As long as Apple remains a reasonably priced stock we will continue to hold it.

Best regards,

Daniel A. Ogden


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