Apple’s Latest Secret Could Generate Massive Returns

In 1991, Steve Young became the starting quarterback for the San Francisco 49ers, one of the National Football League’s most storied franchises. Young was a highly touted prospect, but he was facing an obstacle none of his peers had to overcome.

He was replacing Joe Montana — one of the greatest quarterbacks of all time.

#-ad_banner-#Montana had won four Super Bowls with the 49ers and would soon be inducted into the Pro Football Hall of Fame. While 49ers fans were optimistic about their new, quarterback, they knew he’d never be nearly as successful as Joe Montana.

They couldn’t have been more wrong.

Steve Young won the league’s Most Valuable Player award in both the 1992 and 1994 seasons, and he led the 49ers to a decisive Super Bowl victory in 1995. Despite replacing an all-time great, Young had exceeded expectations.

Today, Apple finds itself in a position similar to the 1991 San Francisco 49ers. Steve Jobs was an icon and incredible innovator, and there are a lot of people who think Apple won’t be able to continue innovating without its founder.

That’s a big shadow for Tim Cook — Apple’s current CEO — to stand under. So how is Cook going to step out from under Steve Jobs’ shadow?

It looks like his first move is attempting to increase Apple’s profit margins.

Apple’s profit margin — the percentage of revenue it has left after it pays out most of its expenses — is about 22% right now. That’s very good.

Now take a look at MasterCard and Visa’s profit margins.

MasterCard’s profit margin, which stands at nearly 38%, is head and shoulders above Apple’s. And Visa’s is even higher, at a gaudy 43%.

Apple has recognized this. That’s why the tech giant has decided that the next industry it will revolutionize is credit cards. If its new Apple Pay technology is as successful as investors hope, then Apple will begin profiting more on each dollar it earns.

Now, one of the most successful companies of this generation increasing its profit margins is nothing to scoff at. But Apple isn’t developing this technology without help.

In fact, Apple has selected a handful of manufacturers to produce the necessary parts for Apple Pay to work. And these small companies are set to skyrocket. In fact, some already have.

Shares of one Apple supplier are up nearly 1,200% since January 2009. In fact, this firm has outperformed its partner, Apple, by almost 300 percentage points since then.

Its market cap has also grown from under $2 billion to around $23 billion in that time. With a 90% share of the smartphone market and its application processors going into the top 10 smartphone manufacturers’ products, it’s poised to see even bigger gains over the next decade.

Another small Apple supplier is one of the only manufacturers in the world capable of producing the complex radio frequency chips that are now going into smartphones. It has gained more than 500% in the last five years, in large part because of its biggest customer, Apple.

And its market cap has also taken off, reaching more than $18 billion, up from less than $2 billion a few years ago. But that’s nothing when you consider that experts predict there will be more than 30 billion connected devices by 2020, in which this company’s products are likely to play a large role.

If Apple can get even half of its 800 million users — who already have iTunes accounts and credit cards on file — to start paying for products and services with nothing more than a wave of their iPhones, then Apple Pay’s key suppliers will pocket life-changing gains.

Bottom line, stepping out of the shadow of Steve Jobs will be tough. But I think Tim Cook is up to the task. After all, thanks to the innovative suppliers Apple has in its back pocket, Cook will have a lot of help.

Apple is a buy today, but I think the suppliers are an even better buy. For names and ticker symbols of these suppliers, I’d like to invite you to check out my report on The Top 5 Apple Suppliers To Buy Now.

I believe this is just the beginning. Apple is seemingly unstoppable, and these firms are poised to benefit as long as Apple continues to thrive. To find out which companies hold the most promise, simply follow this link.