Core Insights - Apple and Costco have generated similar investment returns over the past decade, becoming two of the world's largest companies by market cap [1] - Both companies are expected to continue being long-term winners, but investors should be cautious about the price at which they buy [2] Company Overview - Apple is a leading smartphone and personal electronics company with over 2.35 billion active iOS users globally, while Costco is a membership-only warehouse retailer with a diverse range of goods [4] - Both companies have established core businesses but are experiencing slower growth rates; Apple is expanding its user base and subscription services, with service revenue reaching nearly $53 billion in the first half of the year, up 12.7% year over year [5] - Costco's growth is driven by membership increases, with paid memberships rising by 6.8% year over year to 79.6 million; membership dues are a significant profit contributor [6] Performance Comparison - Over the past decade, both companies have shown remarkably similar stock performance, with annualized returns that have significantly outperformed the S&P 500 [7] - Both companies offer small dividends, with Apple increasing its dividend for 12 consecutive years and Costco for 20 years; their dividend yields are around 0.4% to 0.5%, with Costco occasionally providing special dividends [9] Future Growth Prospects - Analysts project Apple to grow earnings at an average of 10.6% annually, compared to about 9% for Costco [6] - Apple faces challenges in integrating AI features into its devices, but its loyal user base and sticky ecosystem provide some resilience; despite this, Apple is considered the better stock to buy now [10][11] - Costco's stock price has expanded faster than its profits, leading to a high P/E ratio of nearly 54, which is deemed excessive given its expected 9% earnings growth [12] - Apple, with a P/E ratio of 33, is viewed as more attractive if it achieves double-digit earnings growth, bolstered by significant stock repurchases [13]

Core Viewpoint - The recent 90-day tariff pause with China has positively impacted tech stocks, particularly Apple, which is seen as benefiting from increased supply chain certainty [1][4]. Group 1: Apple's Market Position - Apple has recently lost its market cap lead to Nvidia, which is now just behind Microsoft with a capitalization of $3.35 trillion [2]. - The iPhone continues to be a significant revenue driver, accounting for 53% of Apple's revenue in the first half of fiscal 2025 [4]. - Apple holds approximately $157 billion in liquidity, providing it with substantial financial flexibility compared to other public companies [5]. Group 2: Innovation and Growth - Despite its strong market position, Apple faces challenges regarding innovation, as it is not often mentioned in discussions about AI leadership [10]. - Revenue for the first two quarters of fiscal 2025 was $220 billion, reflecting a 4% increase, while net income rose to $61 billion, a 6% increase year-over-year [10]. - The company's P/E ratio stands at 33, significantly higher than the 20 range seen in the 2010s, raising questions about its valuation given the single-digit earnings growth [11]. Group 3: Future Considerations - The 90-day tariff pause is not a permanent solution, and the potential for renewed trade tensions with China remains a concern [8][12]. - Investors should be cautious, as Apple's relative lack of innovation and high valuation may warrant a more conservative approach to stock purchases [13].