Apple Could Decline 70% in the Coming Years

Paul Schatz, President and Chief Investment Officer of Heritage Capital, had some interesting things to say on Breakout this morning. He believes that Apple AAPL is in a multi-year decline that will shave 50 to 70 percent off its peak value of more than $700. "This was a follow-up piece from a late April / early May interview where I made the original call," Schatz told Benzinga. "It wasn't really about the nuts and bolts of Apple, per se, it was about every bull market [having] a story stock. You can go back -- I've gone back 100 years -- every single bull market has a story stock. When the bull market ends, the story stocks are taken out and shot." In 2007, the big story stock was Google GOOG. "We all saw where Google declined in '08 and '09," said Schatz. "In 2000 it was AOL AOL and Yahoo YHOO, and you saw what happened with those. You can go back to GE GE, which was a story stock. GM GM, RCA, Navistar NAV." Sometimes there is more than one story stock. "The common thread is [that] the story stock becomes somewhat ingrained in our investing fiber, which Apple certainly has -- it can do no wrong," said Schatz. "And everyone is talking about how cheap it is based on the P/E. And my cautionary words are, 'So were the housing stocks in 2007.' They were all single-digit P/Es and the banks weren't far behind. So was GE." "What we never anticipate is that when companies mature they go from growth companies to value companies, and that is what I imagine Apple becomes. Apple loses its growth allure. It's already paying a dividend. I expect its dividend to go up, up, up over the years. It's going to become more like a Microsoft MSFT and an Intel INTC rather than a high-growth company." What about Google's rebound? "Google, during the bear market, went from -- I'm gonna round from memory -- roughly $750 to $250," Schatz explained. "That's a pretty big decline. You're talking two-thirds of the stock going down in 18 months." Regardless, Schatz said there is nothing to stop a declining story stock from rebounding. "But we haven't even gotten to the stage where Apple has been taken apart yet," he said. "Apple, from the bear market, went from $92 all the way to $700. So when this bull market ends, I think Apple will have the same fate as we saw with Google." Schatz added that Chevron CVX and Exxon XOM were once similar to Apple and Google. "And those companies are great long-term success stories," he said. "But they went from ascending at a 60-degree angle to ascending at a 25-degree angle. They become much different after they lose that story stock status." No matter what happens, Schatz told Benzinga that he thinks Apple is a great company. "But just because it's a great company doesn't mean that it won't go down in price," he said. "If $700 was the peak, it maybe gives back half to two-thirds of the rally it made from $90 to $700. That would put it between $300 and $400. Follow me @LouisBedigianBZ