AAPL and the S&P

A company can only get so big before it saturates its market.  Unless the company turns into an unwieldy conglomerate, ala the 1960s (market cap growth but not stock price growth), you cannot have much market cap growth when it becomes as big as AAPL.  It is the law of large numbers, and it has done in numerous companies over the years.  MSFT and CSCO are the two that come to mind.  I strongly believe that AAPL has hit its all time high this year and will now be trending lower over the coming years.

Remember that the growth in the EPS of AAPL has been a huge contributor to the growth in EPS of the S&P 500.  A weakening AAPL is a bad sign for future S&P 500 EPS growth.  To understand the fundamentals of the S&P index, you have to understand AAPL.

Let's remember that AAPL is a hardware company, not a "hardware/software/cloud company".  If you don't buy AAPL's hardware, you can't use their software.  The concept of cloud is BS, it is a glorified name for internet data storage.

The history of hardware companies is littered with carcasses, especially consumer hardware companies, one being the former AAPL before the smart phone boom.  Hardware companies, especially consumer hardware companies, eventually become commoditized and gross margins shrink.  AAPL is not immune from this reality, no matter how many AAPL zealots are out there.  If you sell a product, for example an IPad or IPhone at a higher price than your competitors, when there is basically no quality difference, you are essentially trying to turn yourself into a mass luxury brand. I don't know of any luxury brand that can maintain market caps at $400B, $500B.

The reason AAPL was so popular was because its products were clearly the best out there, with competitors bringing out inferior products.  That has all changed.  Samsung and numerous others are quickly catching up, and in Samsung's case, probably already surpassing the quality of AAPL products.  Now you have the death knell of a hardware company.

1. Increasing competition bringing out equivalent or even better, cheaper products.  Gross margins get squeezed hard in the future.
2. A maturing market, with less room for growth.
3. Leadership in the company that becomes arrogant and runs out of innovation.
4. Too faddy and pervasive in the overall market. 
5. Relying on vendor subsidies to meet consumer price points.  Hard to see that continue when the products lose popularity.

AAPL is repeating history, the same way it did with the personal computer, it is doing with the smart phone and the tablet market.  It's arrogance will bite it again, as most consumers will not pay much of a premium for name brand electronics like they do with hand bags, watches, clothes, etc.  And if AAPL doesn't charge a premium, well there goes their gross margins.  Damned if you, damned if you don't.  And lastly, the IPad is a consumer toy, it has no room for serious corporate use.  Good luck trying to type a long report on an IPad.  It will never replace a laptop.