AAPL: What could have been… and what can be.
July 26, 2008
Jason’s VTI post brings to mind a time when I, half-jokingly, told him that out “safe-spot” could be Apple Computers. It seemed like a great idea at the time, back in the fall when Apple and Google seemed to have no ceiling and it seemed foolish not to get on the late 2000’s super-tech company train. Looks like Jason was right about VTI being the way to go… in the unlikely circumstance that we would have invested in AAPL four times, we would have taken 4x the hit that this company has handed us.
It sounds foolish (like I may be giving myself an excuse for being so gung ho on AAPL) but the good/bad news is that a decent amount of the drop hasn’t been balance sheet related. Back in 2004, Steve Jobs had a touch of the… err, pancreatic cancer and the company conveniently forgot to tell investors. Not that this is illegal (the SEC ruled that officers’ health was not an essential factor for disclosure) but it should be! Here we are in mid-2008 and Jobs’s health is again in question. The result? A smaller scale (and certainly less rational) version of the same type of uncertainty that has weighed down the financials ever since the Bear Stearns collapse.
Call me crazy, but I think it’s ridiculous that news, or rather a lack thereof, regarding Jobs’s health and small iPhone glitches should have such sharp effect on a solid company. I think we are beyond the point where Apple Computers would be considered a speculative investment. Products like the iPod, iPhone, and MacBook have established themselves as “bare necessities” to a large group of American teenagers and 20-somethings, creating steadily increasing earnings figures for Jobs’s cult computer company.
Even so, in this fearful market, there may be reason for concern… and concern (while quite concering!) can always be flipped into profit. Bear with me here:
Imagine Steve Jobs’s health is a legitimate concern. Let’s be honest, with the way Apple execs sidestepped questions regarding this pivotal issue during a quarterly conference call, it’s not a big stretch. We sell now, avoiding the TREMENDOUS hit that AAPL would absorb after an announcement that Jobs may be stepping down due to health concerns. Regardless of whether or not we buy back into AAPL a few months down the road after it settles in at a more stable price, we miss out on a possibly huge setback in working our way back even on this investment.
Just a suggestion, but I think it could be a while until we see AAPL hit 200 again. I don’t know about you, but when it happens I’d prefer to have more shares.
July 26, 2008 at 2:51 pm
Look this is exactly what Howard Lindzon is saying is the only thing causing the company’s stock’s poor performance. Not that there’s anything wrong with the company itself, or even with Jobs’ health just that there are too many small investers who got in right when we did who now are selling shortsightedly.
http://howardlindzon.com/?p=3743
I was thinking I might go argue with him on his blog that I thought he was wrong, but I can see now that he had it pegged right. It’s silly to sell a super profitable company (I might even enlarge our position if the price fell far enough over this sillyness).
July 28, 2008 at 12:59 pm
So I see you agree on the idea of having more of a position in Apple… but what about our average cost for this position?
The only way I see AAPL heading up anytime soon is if their earnings numbers blow away expectations, which may happen. AAPL is usually pretty conservative on their earnings forecasts.
July 28, 2008 at 2:35 pm
I imagine if we bought more we would do it at a lower price than we spent on the original shares. We’re currently seeing a small loss, if that loss widened (say the price fell in the $140 range again) I would be all for doubling down. It would both lower our cost basis and increase our exposure to a company that produces products that “return a sense of childlike wonder to the world”.