Apple, co-founded by the late Steve Jobs and known around the globe for its iPhone, is the largest company in the world, measured by market capitalisation. While the iconic smartphone now accounts for less than 50% of the company’s Q3 revenue, its high-margin services business has been growing steadily in recent years, reaching a contribution of over 25% in total sales.
In this article, we’ll share tips for choosing a stock broker to buy Apple stock from Canada, provide a step-by-step guide to help you make your first purchase, highlight exchange-traded funds (ETFs) with high exposure to Apple stock, delve deeper into the reporting structure of Apple, and more!
How to buy Apple stock (Step-by-step guide)
1. Choose a good stock broker
Since Apple is the largest company in the world, you can choose from a myriad of brokers to help you make the purchase. That said, consider the terms offered by each broker and make sure the broker you end up picking works with residents of Canada. Below we highlight five low-cost brokers who work with Canadian residents and are suitable for beginner investors:
|Broker||US Stock commission||Minimum Deposit||Regulators||Canadian dollar available as base currency||Foreign exchange conversion fees|
|Interactive Brokers||$0.005 per share with a minimum of $1.00||$0||IIROC, FINRA, SIPC, SEC, CFTC, FCA, CBI, AFSL, SFC, SEBI, MAS, and MNB||Yes||0.02% with a minimum of $2.00|
|Questrade||$0.01 CAD with a minimum of $4.95 and maximum of $9.95||$1,000||IIROC||Yes||1%|
|Saxo Bank||$0.02 per share with a minimum of $10.00||$1,000||ASIC, FSA, FCA, SFC, MAS, FINMA, AMF and DFSA.||Yes||1%|
|XTB||$0||$0||FCA, KNF, CySEC and FSC||No||0.5%|
|Qtrade||$6.95 – 8.75 CAD||$0||IIROC||Yes||1.5%-1.99%|
As you can see from the table above, all brokers except XTB offer CAD as a base currency, meaning you can fund your account in CAD. That said, your Apple trades with all five brokers will be executed in USD, meaning you will incur foreign conversion fees from the CAD/USD exchange rate.
2. Open and fund your account
Once you have weighed the pros and cons of each broker, you are all set to open an account. The process usually takes a few days as the broker verifies your identity. After the process is finalised, you must deposit money into your account.
3. Place a “Buy Order”
If you have found an online broker that suits your needs, managed to open an investment account, and made the initial deposit, you are all set to buy your stock. All you have to do is find the share within your chosen broker and place a buy order. For this example, we will use the mobile version of Interactive Brokers GlobalTrader:
a) Search for Apple stock ( ticker “AAPL”) and select it from the list:
b) Click “Buy”:
c) Choose the order details. Now, it’s time to choose how to invest:
The three most important order parameters to set are:
- Type of order: By default, Interactive Brokers sets your order type as Limit, short for Limit order. This is good since it allows you to set a maximum price at which you are willing to buy the shares. The alternatives are a Market order, which will purchase your shares at the best available price immediately, and a Stop order, which is a more sophisticated order – it will enter a market order once a specific stop price is reached (in our example above, you may set the stop price anywhere below $181.68, for instance at $175).
- Limit price: Assuming you kept the “Limit” as the type of order, you need to set the maximum price you are willing to pay per share. If you use Market order, you do not need to fill this and will buy at the best available Ask price. If you use a Stop order, you need to set a Stop price.
- Shares: Here, you define the number of shares you want to purchase; alternatively, you may set a dollar amount instead.
Additionally, Interactive Brokers GlobalTrader allows you to set two more parameters that are not as important:
- TIF: Short for time in force. This option shows how long your order will remain active. It is set to Day by default, meaning it will get cancelled unless executed until the end of the day. The alternative is Good ‘Til Cancel, which means the order will be active for up to 90 days or until you cancel it manually.
- Market Hours: This option shows in which time interval your order will be valid. The default option is Extended, meaning your order participates in trading during regular trading hours, as well as before and after the regular opening hours of the exchange. However, while Apple is one of the most liquid shares, trading in extended hours is often associated with larger bid-ask spreads and illiquidity, especially for smaller companies. Hence, you may want to change the default option to Regular, meaning your order participates in trading only during the regular opening hours of the exchange, when trading is most liquid. The last option is Overnight, which means your order only participates in trading after regular hours but before the exchange opens on the next day.
d) Preview the order: Finally, it is a good idea to click Preview and double-check everything is in order. A new window will appear:
e) Place the order: Once you have double-checked the order parameters, you may close the preview window (tap anywhere outside it, or click Cancel) and drag Slide to Buy to the right to finish the process.
ETFs – an alternative way to gain exposure
ETFs allow you to gain exposure to a dozen or even hundreds of companies with a single investment. ETFs can be a good option if you:
- Want to complement your Apple position with similar companies;
- Want to limit your portfolio volatility (ETFs invest in many companies operating in different lines of business, limiting your exposure to idiosyncratic risks);
- Are interested in following a specific theme in your investments (technology stocks, information technology stocks, etc.);
Some ETFs you may want to consider are:
- Vanguard Information Technology ETF (ticker VGT) tracks 323 stocks in the Information technology sector, although it is heavily skewed to large capitalisation companies. The ETF distributes dividends, and the expense ratio stands at 0.10%. Apple carries the largest weight in the ETF at 22.72%, followed by Microsoft at 19.74%.
- Invesco QQQ (ticker QQQ) is a broad technology ETF following the Nasdaq-100 index. The ETF distributes dividends, and the expense ratio stands at 0.20%. The weight of Apple in the ETF is 11.10%, followed by Microsoft at 9.55%.
Apple’s Financials and Performance
Once you have purchased Apple shares, it is a good idea to keep track of how the company and its competitors are doing. In doing so, you will get greater insight into whether to add to your position, hold it, or sell it to pursue better opportunities elsewhere.
Apart from the investor relation section (available here), there are specialised platforms to help you understand how Apple is doing from a financial perspective. One platform you can use is Koyfin – you can access Company overviews, Key statistics, Financials, Transcripts, and more! Get a 20% discount on Koyfin.
For example, Koyfin allows you to get a quick handle on how the company’s revenues and margins (as measured by gross profit) are doing:
While such platforms cannot substitute your own research 100% of the time, they can be a very useful tool in the research process, saving you time and providing new investment ideas.
The go-to place to find up-to-date information on the company is its investor relations section, available here. Below, we will provide a quick overview of the company’s operations.
Apple has a fiscal year ending on the last Saturday of September (the company is currently in fiscal 2023) and reports sales in two broad categories:
- Products – roughly 74% of revenues
- Services – around 26% of revenues
Products encompass what the company is known for – the iPhone, the Mac, the iPad, as well as a broad category called “Wearables, Home and Accessories”. The segment got a big boost during the COVID-19 pandemic (+51% sales increase in fiscal 2021) but has seen growth slow down in recent quarters (even going negative in Q1-Q3 of fiscal 2023).
The segment has a lower profitability than Services, with a gross margin of around 35% most recently.
Services cover a variety of activities, including Advertising, AppleCare (support and repair services), Cloud Services, Digital Content (covers the App Store and other platforms), and Payment services (Apple Card & Apple Pay). The services segment has been a consistent grower over the past few years, with its revenue less exposed to product release cycles.
The segment boasts a very strong profitability, with a gross margin of around 71%, almost double the Products segment.
From a geographic perspective, Apple is heavily exposed to revenue outside the U.S., with revenue outside the Americas accounting for over 55% of total sales. Thus, keeping track of how the U.S. dollar is performing relative to other currencies can be helpful. An easy way to do so is the U.S. dollar index, which measures the dollar’s performance relative to a basket of currencies.
As per the latest annual report (available here), Apple’s high margins are partially the result of outsourcing, making the company vulnerable to supply chain disruptions and/or geopolitical tensions:
“Substantially all of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in Asia, including China mainland, India, Japan, South Korea, Taiwan and Vietnam, and a significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations”
With an increased reliance on services and diversification of its manufacturing base into India, the significant geopolitical exposure of Apple is set to diminish.