Our Theme of Apple Component Supplier Stocks, which includes a diverse set of companies that supply components for Apple’s devices, has gained about 12% year-to-date, underperforming the S&P 500 which remains up by 15% and Apple stock (NASDAQ: AAPL), which has gained about 40% year-to-date. Now, Apple’s recent performance has actually been pretty mixed. Over Q3 FY’23, the most recently reported quarter, the company saw overall revenues shrink year-over-year, as demand for core computing products including the iPhone, iPad, and Mac fell as tailwinds seen through Covid-19 eased. Major suppliers like Jabil and Qorvo have seen revenue decline or flatten year-over-year.
Notably, AAPL stock had a Sharpe Ratio of 1.1 since early 2017, which is higher than the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
That being said, there are some near-term positives for the theme. Apple is slated to unveil its next-generation iPhones sometime in early September. The new smartphone is expected to feature meaningful upgrades and possibly design changes versus the iPhone 14, boding well for suppliers from a component content per-device perspective. Multiple reports indicate that Apple will raise pricing on the Pro devices by $100 to $200 this time around, implying that prices for Apple’s flagship phones will start at as much as $1,200. This is long overdue, given that Apple has held the starting price of its premium devices at $1,000 over the last six years. Higher average iPhone prices should give suppliers some more room to negotiate better deals with Apple. Separately, the supply chain issues faced by semiconductor players through Covid-19 is also easing, and this could also help the theme.
Within our theme, Jabil stock (NYSE:JBL), a company known for making casings for Apple’s iDevices, has been the strongest performer, rising by about 67% year-to-date. On the other side, Texas Instruments (NASDAQ:TXN) – which supplies semiconductor components for the iPhone – has been one of the weaker performers with its stock up by just about 3% year-to-date.
|S&P 500 Return||-3%||15%||98%|
|Trefis Reinforced Value Portfolio||-6%||29%||563%|
 Month-to-date and year-to-date as of 8/29/2023
 Cumulative total returns since the end of 2016