Why I sold my Apple stock at the end of 2023 and where to invest instead

apple (AAPL -0.40%)is one of the Magnificent Seven stocks, valued for their growth and stable earnings, and helped push the overall stock market back toward record highs in 2023.

Despite rising interest rates and the resulting slump in consumer spending worldwide, Apple’s performance was strong. Taking into account reinvested dividends, Apple stock’s total return in 2023 was a whopping 45%.

Although I like to make small changes to my portfolio over time, I decided to sell some of my Apple stock near the end of 2023. Here’s why and where I invested instead.

Which Grand Seven stocks are the most “expensive”?

I’ve owned Apple for many years, through good times and bad. 2023 was an interesting year. Despite being part of the proud Magnificent Seven group of tech giants (thanks to the aforementioned share price outperformance), this year has actually been far from perfect for Apple.

The iPhone remains the flagship product, accounting for 52% of the company’s $383 sales. a billion Revenues will increase for fiscal year 2023 (ending September). But as I wrote in November, even iPhone sales declined slightly. Even the continued growth in services, coupled with the sharp decline in PCs (mainly MacBooks for Apple) and other consumer electronics markets (iPads, Watches, AirPods, Beats, etc.) will be enough to sustain Apple’s revenue growth. It wasn’t enough.

Apple was able to compensate for this weakness with ample share buybacks. The company bought back and retired $77.6 billion worth of stock, effectively reducing its share count by 3% last year and boosting earnings per share for shareholders.

This has been a great strategy for investors during the bear market of the past few years, and my over-allocation to Apple has helped preserve my portfolio. However, if you believe (like I do) that a new bull market is coming early, then slow growth and share buybacks may not be the best strategy.

Apple stock looks expensive given the expected slow earnings growth in 2024. In fact, Apple trades at a premium of 28 times Wall Street analysts, despite having the lowest long-term earnings growth rate of any Magnificent Seven stocks (expected 9%). ” and next year’s performance forecast.

Data by YCharts. P/E = price/earnings ratio. EPS = Earnings per share. LT = long term.

This is why I sold part of Apple and redistributed the proceeds elsewhere. That being said, I still have a lot of Apple in stock. Right now, it’s mostly coming from my old index fund investments. Vanguard Growth ETF (of which Apple accounts for approximately 13% of the portfolio). Vanguard Information Technology ETF (22% of portfolio), Warren Buffett’s berkshire hathaway (nearly 50% of Berkshire’s publicly traded stock holdings).

Nevertheless, given that Apple has grown into a slow-growing business and still has several decades to go before it needs investment capital, we felt a trim and rebalance was necessary.

Where do you invest your Apple winnings?

When I was looking for an alternative to rebalancing my portfolio, I started with the Magnificent Seven itself.I have already purchased more alphabet last year. But his two remaining parts of the huge digital advertising market are meta platform (NASDAQ:Meta) and Amazon (AMZN 0.46%) –Pricing still looks attractive for an expected revenue recovery in 2024. I have taken on a larger position at Amazon as we explore ways to monetize our vast e-commerce and digital consumer empire.

Data by YCharts. P/E = price/earnings ratio. EPS = Earnings per share. LT = long term.

After a great year for building generative AI infrastructure, primarily Nvidia), I think battered software stocks could benefit in 2024 as all the newly introduced AI hardware starts to be monetized.Added to long-standing position sales force (CRM -0.05%) I’m about to start buying again and finally ServiceNow (now 0.64%) sometime this year. Other cloud computing stocks also look attractive going into the new year.

And of course, I still like semiconductor stocks, too, especially if sales of iPhones and other consumer electronics recover in 2024.

To be clear, Apple appears to have all the ingredients to continue to be a good long-term investment. Growth may be slower than in the past, but the tech giant is highly profitable and provides large amounts of cash to shareholders. I’m happy to continue holding it, but I think it has a better growth opportunity now due to its high valuation compared to other tech stocks.