Apple shares have been on a roll for the past few years: up approximately 50% within the last year, 265% over the three previous years and 8,000% in the past 10 years. To put the gain into perspective, in July of 2002, Apple stock traded for around $7 per share. Had you invested $10,000 you could have bought roughly 1,429 Apple shares. If you held onto those shares, they would be worth over $894,000 today.
Apple has come a long way and revolutionized several industries over the past decade: iTunes changed the music industry, the iPhone has transformed the telecom sector and the iPad has created an entirely new market. The company is on a roll and with the tablet market barely penetrated and a potential Apple television in the future, Apple's stock could have even further gains ahead.
One issue that arises in purchasing stock in the company is that Apple's stock is no longer $7. As of closing on August 13, 2012, Apple traded at $626. The stock is no longer cheap and investing $10,000 will only allow you to buy about 15 shares. The solution: invest in Apple suppliers. Below are a few companies that should profit off of the success of Apple and may be a more viable investing option for many.
Founded by MIT professors, the company provides backend infrastructure service and software for several big customers, such as the U.S. Security and Exchange Commission, Toyota Motors, the NFL and Morgan Stanley, to name only a few. Akamai launched in April 1999 and since has become a dominant force in the industry. Akamai states on their website "if you've ever shopped online, downloaded music, watched a web video or connected to work remotely, you've probably used Akamai's cloud platform."
Akamai provides Apple with infrastructure support for content delivery, QuickTime Streaming Operations and software downloads for Apple's website. Apple, having foreseen Akamai becoming such a vital partner back in 1999, invested $12.5 million dollars for a roughly 5% stake in Akamai. Steve Jobs was quoted as saying "Together, Apple and Akamai will deliver the highest quality and easiest to use Internet streaming video content available."
Akamai shares currently trade around $35. Returns over the past 10 years have been over 3,100%, roughly 76% in three years and around 21% in the past year. If you're looking for an affordable investment with direct relationship to Apple, Akamai may be an excellent opportunity.
With a market cap over $100 billion, Qualcomm is a major supplier in the technology industry. The company provides Apple with processor chips for products like the iPhone and iPad. A report published by Forbes states Qualcomm makes approximately $23.54 off each iPhone 4S sold. With 26 million iPhones sold in Apple's recent Q3 earnings, Qualcomm racked in over $612 million dollars in just three months, from only one product.
The new iPhone is also set to be released later this year and despite 26 million iPhones still being sold, many are waiting for the newest Apple gadget to be released before upgrading. Rumors have circulated that Qualcomm will supply the iPhone 5 with a 28 nanometer chip, so Qualcomm is sure to reap the rewards if Apple's iPhone 5 dominates the market. Historically, the top selling quarter for the iPhone is directly after the newest version has been released. In Q1 and Q2, after the release of the iPhone 4S, Apple sold roughly 72 million phones.
With a one-year return around 8%, beating the approximate 6% of the S&P 500, Qualcomm is fairly priced at just under $60 a share. This may be a great chance to cash in on some of Apple's success. Qualcomm has returned over 350% in the past 10 years and around 27% in the past three years.
Headquartered in Woburn, Massachusetts, Skyworks Solutions was founded in 1962 and provides semiconductors for a wide range of devices. Apple is the largest purchaser of semiconductors, purchasing roughly $24 billion in 2011, nearly $10 billion more in semiconductors than Samsung Electronics, who falls in second place at over $14 billion.
In 2012, Apple is expected to buy around $28 billion in semiconductors, a growth of roughly 15%. Skyworks should benefit from this increase as it supplies Apple with products for the iPhone and iPad.
Trading around $28 per share, Skyworks has returned over 715% in 10 years; 2011 returns were up nearly 10% and up roughly 260% over the past five years.
The Bottom Line
If you believe in Apple's future, then the companies above may be a great way to indirectly invest in the company at a lower price point. Keep in mind that the companies mentioned deal with many other large corporations - some even supply Apple's competitors, as well. So even if Apple continues to grow market share, there is still a possibility the above firms may not benefit. Buying shares in these companies can not only be a way to invest in Apple, but to diversify your risk from investing in just one company. If you believe in the growth of the entire smartphone and tablet market, the above companies may be a great way to benefit from the expansion of the whole industry.