Source: PaxForex Premium Analytics Portal, Fundamental Insight

As we know, Apple is close to a duopoly with Samsung in one of the most popular products in the world - smartphones. Together they account for more than half of the global smartphone market. In the U.S., however, the iPhone has about 50 percent of the market.

Warren Buffett, one of Apple's biggest shareholders and the most famous cheerleader, believes Apple is the best business in the world. Throughout the iPhone's upgrade cycles, Apple has consistently improved its design and functionality to meet the ever-changing tastes of consumers. Perhaps most importantly, the iPhone camera gets better with each new version. iPhone users can quickly take the highest quality selfies and videos of their children's soccer games and post them to social networks in the blink of an eye.

Speaking of the lines of iPhone devotees standing outside Apple stores in anticipation of the new models, Buffett's right-hand man Charlie Munger said: "I have millions of friends who would almost give up their right hand before parting with their iPhones. That's a very strong position."

But it's not just the iPhone that keeps people in the Apple ecosystem.

Buffett called the iPhone a "sticky" product, which means that customers keep coming back to Apple smartphones. In addition to the iPhone's eye-catching design, users love the brand for its value-added services. iPhone users can buy additional iCloud storage, download music from the Apple Music app, and make contactless payments with Apple Pay. And if iPhone users wanted to switch to a competitor, they might have to give up valuable data stored in iCloud or re-enter their cards on the new payment platform.

The tiny fees that customers are happy to pay for these widely used services may seem like a small thing for a giant company with a market value approaching $2.5 trillion, but the financial implications may surprise you. Because these services are digital, customers incur minimal additional costs when they add the service to their iPhones. This means that every new dollar of revenue Apple generates from its services is more profitable than the previous one.

In 2017, when Apple first disclosed the segment's results, revenue from its services was $32.7 billion. The gross margin on services revenue that year was 55%. By 2021, services revenue had doubled to $68.4 billion and the gross margin had risen to nearly 70%.

Apple's services business has a lot of room for further growth. For example, only about 75% of iPhone customers have activated Apple Pay, and many have yet to start using it. However, Apple Pay has already overtaken Mastercard in terms of transaction volume over the past 12 months. As users continue to use Apple Pay and download new music, Apple's services segment could become a bigger part of its overall business, which grew from about 20 percent of total gross revenue in 2017 to more than 31 percent last year.

Apple has a huge advantage over many companies in that its increasingly profitable services segment is also the fastest growing. When you consider that this segment also makes iPhone users more loyal to the company, it becomes clear why Buffett loves this company.

Another reason many investors will like Apple is the stock buyback. For the past 10 years, the company has been buying back stock on a regular basis, which increases the percentage of the company's stock owned by existing shareholders. In addition, massive stock buybacks increase earnings per share, all other things being equal.

When you combine Apple's advantages over other companies and its ability to buy back stock at a tremendous rate, you get a stock that is highly likely to outperform the market over the next five years. Investors should follow Buffett's lead, given that he bought more stock in the first and second quarters of this year when the stock was pulling back from its 2021 highs.

As long as the price is above 149.00, follow the recommendations below:

• Time frame: D1
• Recommendation: long position
• Entry point: 152.14
• Take Profit 1: 158.00
• Take Profit 2: 164.00

Alternative scenario:

If the 149.00 level is broken-down, follow the recommendations below:   

• Time frame: D1
• Recommendation: short position
• Entry point: 149.00
• Take Profit 1: 141.00
• Take Profit 2: 130.00