Elazar was launched in 2004 by Chaim Siegel and has served famous hedge fund clientele who demand a keen understanding of drivers of individual companies and financial markets. Chaim twice worked for renowned trader Steve Cohen of then-SAC Capital (now Point72). He was also a partner at JLF Asset Management which was funded by George Soros. Previously he was one of seven analysts on a $13B mutual fund at Morgan Stanley Asset Management. Elazar Advisors publishes its research into the Reuters/Refinitiv Institutional Platform and Factset where Elazar's earnings estimates are factored into the Street earnings numbers.  Elazar's research is used regularly by fundamental and algorithmic traders and investors at some of the largest mutual fund and hedge fund managers in the world. Chaim has been a 5-Star top ranked analyst in Tesla and other big cap tech companies. Try us with a  free trial here . All investments have many risks and can lose principal in the short and l

Apple New Highs But Not Their Suppliers

Can Apple (NASDAQ:AAPL) do well while their suppliers suffer? The answer is yes for two reasons. For one Apple's inventories are up big year-over-year and two Apple's bringing some production in-house.

So the normal trade of buying the suppliers on the cheap because Apple's doing well may not be as clear as in the past.

High Apple Inventories

On Apple's most recent earnings report inventories rose from $2.91B to $7.66B year-over-year for the March quarter, an increase of 163%. Those high inventories imply less need to buy from their suppliers in the future.

Apple was asked on their conference call about the inventories. They answered the high inventories "should unwind over time."

Over time? That tells me higher inventories are not going to get fixed right away.

Apple suppliers could suffer.

Bringing Components In-House

Apple's growth in Research and Development (R&D) has been accelerating.

Jun Sept Dec Mar

Q3 Q4 Q1 Q2A
FY 2017 2017 2018 2018
Cal Yr 2017 2017 2017 2018
R&D 2937 2997 3407 3378
Growth 14.7% 16.6% 18.7% 21.7%

Above you see each quarters R&D has grew faster than the prior quarter. Much of that is Apple innovating to bring component production in house.

We spoke with Apple and think they are excited about moving production such as processors, batteries and displays in-house. They say it reduces costs and accelerates time-to-market.

This hurts their suppliers.

Apple Supplier Chart
Apple New Highs, Not Their Suppliers

That may explain the performance disconnect. Apple's stock has been hitting all-time highs but its suppliers have not.


A slow, gradual wind-down of their excess inventories along with bringing production in-house will likely continue to be a headwind for their suppliers "over time."


All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no positions of the stocks mentioned.

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