TopPicks from Paul Harris, partner and portfolio manager, Harris Douglas Asset Management
Paul Harris, partner and portfolio manager at Harris Douglas Asset Management, discusses his top picks: Apple, Amazon.com, and Alphabet.In our view current headwinds are transitory. A number of issues have led to the stock’s worst year so far since 2008. Apple shares have tumbled 23 per cent so far in 2022, steeper than the Index which is down 18 per cent.
One setback has been a series of shipment delays for Apple’s iPhone 14 Pro and Pro Max, stemming from COVID-19-related lockdowns given manufacturing disruption issues in China. We see these headwinds as transitory and investors should remain focused on the long-term opportunity. We remain focused on other areas of revenue growth for Apple, including its wearable products, such as watches and AirPods and its services segment. New product launches should also help the company down the line. Services have a clear path to $136 billion in revenue by full year 2026, which will drive margin expansion and help smooth out the cyclicality inherent in the hardware business. Wearables also have a robust growth outlook, with a path to $70 billion in revenue.
In November, the company announced plans for a staff cut of about 18,000, due to macro challenges and a previous flurry of hiring. It also paused corporate hiring in November. The online retail giant saw an uptick in its market share since the pandemic and has since roughly levelled off to about 45 per cent of U.S. e-commerce.
Furthermore, Amazon, along with Alphabet‘s Google and Meta Platforms have dominated the share of new ad dollars brought into the ecosystem within the global digital ad market. With valuations near trough levels, and estimates already dialled back, we see much of that negativity as priced-in and see a favourable risk/reward among many internet stocks. This is a high-quality company, well positioned to outlast the near-term macro challenges and should come out ahead in the new landscape.
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