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“It was certainly ripe for some profit taking,” Rolfe said. “But the market is now pricing in a bear market of Apple’s fundamentals, which just isn’t the case. If you assume margins hold steady and the company maintains a single-digit growth rate, the fair value of the stock is still $750.”
Rolfe told Barron’s at the end of last month that Apple’s stock was trading as if it may increase revenue only 3 percent or 4 percent per year, rather than the 22 percent modeled for this year. In addition, the consensus Wall Street estimate is now as close to Apple’s hyper-conservative guidance as it has ever been, which raises the possibility of Apple beating estimates when it next reports earnings next week.
And according to Rolfe, his fund wasn’t the only one to add to its position at the bargain price of around $500. In the September quarter, Wedgewood ranked only 67th in percentage of fund holdings invested in Apple.
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