Dan Niles on why he's steering clear of Apple long-term

Dan Niles Niles investment and management founder is here. He’s, you know it’s all about tech and you you like to own some and you like to short some and and we want to hear about that. But I think what you you’ve got some comments about about Apple. It’s up this morning. It’s it’s one of your biggest holdings long, isn’t it, Dan? Correct. It’s my second largest holding on the long side in terms of single stocks. And I think when you look at Apple, it has a pretty consistent pattern in the sense that people always want to get excited in front of new products, et cetera. So I don’t think investors are going to focus on the fact that revenues are down 4% year over year and the fact that over the last three years they’re only up 1%. And you compare that against the Magnificent 7 revenues are up 42% year over year and they’re up 86% year over year over the last three years. And if you go out to even five years, the Magnificent 7 revenues are up 275% and Apple’s only at 56. So no matter what time period you want to look at this, the stock on a revenue growth basis is underperformed. But for investors, there’s always the hope that there is a upgrade cycle coming or there’s some great new product. And what you have coming in June 10th is the Worldwide Developers Conference. And the hope is that they’re going to put out stuff on AI and that’s going to drive revenue growth and an upgrade cycle. And so we think the stock will trade up into that. And then eventually you’re going to get to whatever the reality is in terms of does that actually happen when they actually go out to sell these new iPhones, much like you saw with the Vision Pro where nobody’s really talking about that anymore, driving revenues, right. So even though as you state here in the notes that stocks in the short term trade on things like that, investor belief, sentiment, not necessarily fundamentals in in valuation, I’m sure you pored over the details of Apple’s report anyway, even though that might not be, you know what, what causes the stock to move today. So in there, if you look granularly, what what was not as bad as people thought, well, what was solid was services that did well and I’m Max did well. If you look at it, iPhone still came in a little bit below expected. And I know Apple’s trying to talk about mainland in China, but they were poor China, Greater China and that was still down 8%. And so there’s no way you can look at this report. If you look at what they guided to, which was originally revenues flattish versus last year, they reported down 4. Apple probably has the one of the best investor relations teams on the market because they managed to get all the estimates down between when they originally gave guidance to NAP. And so you know, they came in and it looks like they got to the numbers, but those are the pieces within that. But remember there’s some pressure on the services side and that we’ve got this government lawsuit going on. So we’ll see if they have to unbundle what Google pays to them, which is a big portion of the services profits, etcetera. So there’s some risk to that going forward. So from a longer term basis, we still like the other Magnificent, you know, the other names in the Magnificent 7, so specifically Amazon, which just has tremendous profit growth. Meta, Microsoft, so NVIDIA obviously on the AI side. So those are the ones that we’d be more focused on. On the long side, you own all those, you own all those and and you like all of those. Fundamentally long term, you like all those better than Apple, long term, correct. Near term Apple. I think between now and June 10th when they have their AI event, it’ll probably outperform because people yet again are going to be hoping for an upgrade cycle coming. Can I, if I, let’s say that I don’t know where the market’s going. So I’d like to maybe have a short position in something in case, I don’t know, in case the NASDAQ comes down. What? What are you short anything. Oh yeah, I mean Tesla is a name. We’re short again. We’ve got other shorts. I mean shorts for your viewers, I mean they’re incredibly dangerous. So if you’re doing single stock shorts, you better really have a good grip on this and also manage the risk where you know you’re covering and you’re re engaging because stocks aren’t generally they don’t go to 0, right. But I think if you want to hedge the market, you’re better off doing a broader based short position around things like the S&P 500 or NASDAQ. I mean it’s may surprise some of your viewers, but NASDAQ is up less than the S&P so far this year. So there’s a group of names where profits are surging such as an Amazon or a meta, etcetera. And then there’s another group like an Apple or a Tesla where you know they’re just not growing right now. And so that’s where you need to kind of get a lot more selective. And so this is a great environment for a stock picker. It’s a horrible environment if you’re just sort of have a big picture view and you just throw money into the market. I think and I think you you really didn’t think this was a good time before this this report to own up where you were kind of recommending people steer, steer clear. So did it surprise you did is it the, the move in the stock surprises you or something in the results that surprises you more? Well, I mean you kind of had a hint it might not go so poorly when you saw big suppliers to Apple massively cut their forecasts and Apple actually didn’t budget. So Qorvo came out before Apple numbers came down tremendously. Stock got clobber, over 50% of their revenues is from Apple. Skyworks came out, reported numbers went down tremendously, stock got hit. Apple didn’t really budget either. And so that sort of gives you the hint. And as we talked as you mentioned earlier, right, stocks in the near term, it has nothing to do with fundamentals, right? It’s perception. And so the fact that Apple managed to get to the lowered numbers with revenues down managed to say, hey, we think you know for the next quarter we’re going to see some low single digit growth. That actually did surprise me. But remember Apple said they were going to grow a lot in the March quarter as well and they shrunk cool. So perception and reality, right now we’re dealing with perception and that’s a beautiful thing if you want to be bullish.