What is the most used technological device in this decade? Or, which is the technological market with biggest growth last years? The answer to these questions is easy if we look around and see what people are doing all the time anywhere. The answer is: mobile phones, or its proxy, tablets. And, what company produces the most famous mobile device? Apple. Given these data, it is not difficult to see how Apple is one of the most powerful companies in the World. We should not be surprised either if that stock has had an exponential growth the last decades.
Contrary to many of the technological companies of the new era, Apple is a company with a very sound business and a long road travelled in the stock markets. It did not come out a couple of years ago like Facebook or Twitter. If we go back to 1985, we can find this stock trading at $0.25. Compared to the $110, it means a 40.000% profit, or in other words, the stock has multiplied by 400 in 30 years. Who was lucky enough to buy Apple in those years? Not many people. Nobody could know where Apple would be 30 years later. Likewise, there are hundreds of promising companies that “do not make it” and stay in a permanent coma. Just remember JDS Uniphase.
The road was not easy for Apple, nonetheless. Without considering the uncountable business problems throughout the years, the number of bear markets of this stock is impressive. However, if we want high volatility in the long side we should expect big volatility in the short side. You do not get 4000% bull markets without many 70% bear markets usually.
In fact, the eighties and nineties were not easy years for Apple. In the eighties it suffered two great 50% consecutive bear markets, and, in the beginnings of the nineties it had an 80% bear market that lasted many years. Only with the final phase of the Nasdaq bubble, the stock could rise significantly – a 1000% in a few years. When the bubble collapsed, the stock fell an 80% again. It was a good time to invest certainly. After that, Apple has suffered more bear markets, one of about 40%, 70% in 2008 and 50% in 2012. The last of those bear markets was in absence of a major bear market in the Nasdaq.
As we can see, even one of the best stocks in the history of the World could not avoid a great deal of impressive bear markets: two of 80%, one of almost 70, and many of 40 and 50%. Who can stand so many bear markets? Obviously, someone like Steve Jobs. However, I am sure, a lot of people bought Apple stocks just before those bear markets and sold them at the bottom thinking that it was a very bad investment.
We will have a 40.000% bull market in Apple in 30 years, again? I think that it is very unlikely that we will see it. In absence of hyperinflation, I would say it is almost impossible.
Apple will probably carry on being the market leader in its business for many years to come. Its iPhones and iPads will still rule the market for a while. But, as with any company that is leader in a sector, it will have to face stiff competition. The other companies will just “copy” the leader, and that is what it makes difficult for a leader to keep growing like before. The time to get rich with Apple is gone already. It was the time when Apple went from a medium company to be a World Leader. From that point of view, we could consider it a “conservative” stock, and whether we can say so for the stock markets. Investing in Apple, we would not be betting on a penny stock with a model for the “future”, but for the world leader in consumer technology.
However, and as in the Google case, or any other stock today, I cannot get out of my head about the fact that we are probably in the middle of a very dangerous stock market cycle. Being long in stocks for the long-term is quite risky nowadays.
We are in the middle of a crisis that has not yet said its last word (in fact I think that the “funniest” part has not started yet). Besides, the problem is that the market of reference for Apple, the Nasdaq, has increased a 400% in five years without a significant correction. In other words, we might say that the Nasdaq is “technically” overbought. It may go up another 400% without bear market, but I think that it is not likely.
When I think that there could be a big bear market, I mean that it could be or more than 60 or 80%. Do you imagine investing $40.000 in Apple in the middle of 2015, just before an 80% bear market starts? Would I keep my investment when I see it has lost $32.000? The world of investment is, without question, very hard.
Anyhow, and despite what I just said, Apple is one of the soundest companies in the World, and has excellent numbers to back it. Investing or not in Apple depends on many factors. In my particular case, I would rather “invest” in it with a nice discount. Let us see what happens.
P.S. This is a personal translation from my Spanish blog www.brokerparacompraracciones.com.
Thanks for reading and sharing.