Is Apple the one stock you need for retirement?

“If you were to pick a basket to put all your apples in, Apple (AAPL) stock would have been an appealing choice,” Matt Krantz writes for USA Today. “Investors like to think a stock that made other people rich before, will make them rich, too, in the future. And given the tremendous run in shares of Apple, it may seem like a no-brainer to place a big bet on Apple. And given the past, it’s hard to argue otherwise.”

Krantz writes, “Just consider an investor who bought $10,000 of stock at the beginning of 1999. Perhaps this would have been a young investor’s early retirement savings. The shares closed at $10.31 on Jan. 4, 1999, meaning the investor could have bought 969.932 shares that day. Now that Apple shares are trading for roughly $500, those 969.932 shares would be worth $484,966. That’s a remarkable 35% average annual compound gain, which blows away just about any mainstream investment you could have made during that time.”

Krantz writes, “Some investors make a case that Apple is a cheap stock. But it’s hard to argue that a stock that’s up 4,749% since 1999 is beaten down.”

MacDailyNews Take: The amount of increase has absolutely nothing to do with whether Apple’s stock is cheap or not. It’s not hard to argue at all, unless you’re trying to argue with an idiot. Apple’s current P/E ratio of 15.09 is ludicrous for a company with its demonstrated stellar performance and tremendous growth prospects.

“Could Apple continue to be that only stock that matters? It’s certainly possible. Consumers of Apple products continue to demonstrate that even amid a recession, they have no problem paying the premium the company charges for its products,” Krantz writes. “The company also continues to dominate just about any industry it goes into, ranging from digital music to tablet computers and increasingly smartphones. If consumers continue to ignore competition, it’s hard to see anything stopping the power and influence of Apple.”

MacDailyNews Take: Smart consumers ignore Apple’s so-called “competition” because they they offer inferior, derivative wares. They simply can’t compete. Some “competition” that is.

Krantz writes, “At the same time, just about all hot stocks eventually get challenged. Laws of economics dictate that eventually companies enjoying extremely large profit margins are challenged by competition and replacement products. Perhaps it’s truly different this time with Apple. Perhaps Apple’s popularity and keen advertising will continue to defy the laws of economics. Just not sure you’d want to bet your retirement on that happening.”

Read more in the full article here.

MacDailyNews Take: It depends on when you’d like to retire, doesn’t it? A handy tip: If an article purports to discuss investments and retirement planning sans a timeframe, it isn’t worth a Zune. The entire article could had been the headline followed by eight words: “Don’t put all your eggs in one Applecart.” Doing so would have eliminated Krantz’s recurrent bouts of stupidity.

[Thanks to MacDailyNews Reader “Carl H.” for the heads up.]

40 Comments

  1. Apple is by far my best performing stock. But frankly I just see a bubble that will burst. I just hope I sell before some successor to Tim Cook Ballmerizes the stock.

  2. And how many times has it split since 1999? I know at least once a few years ago (2004 or 2005?) So that investor would have at least twice as many shares right now, correct? So just under $1,000,000 from a $10,000 investment?

    1. AAPL has had a 2:1 split, three times in its history:

      – June 6, 1987
      – June 21, 2000
      – February 28, 2005

      Ergo:
      2000 split – 970 x 2 = 1940
      2005 split – 1940 x 2 = 3880
      2012 value – 3880 x $500 = $1,940,000 (!)

    2. A split (2 for 1) means you have twice as many shares. You are correct. But they are worth 1/2 of their pre split value. Please seek financial advice before you invest your money. And the best financial advice is what you can do to educate yourself. Learn to take care of your own money. It’s much safer, providing you know at least the fundamentals. It takes time but its the best way to use your free time. Read all you can.

      1. “Just consider an investor who bought $10,000 of stock at the beginning of 1999. Perhaps this would have been a young investor’s early retirement savings. The shares closed at $10.31 on Jan. 4, 1999, meaning the investor could have bought 969.932 shares that day. Now that Apple shares are trading for roughly $500, those 969.932 shares would be worth $484,966.” Now figure in the split and his basis was $5.155. His 969.932 shares became 3879 shares now valued at $530.00 each, or roughly $2,000,000.00. No mistakes there. I know because I bought mine in 2003.

  3. How big is the music distribution space?
    How big is the movie distribution space?
    How big is TV distribution space?
    How big is the digital advertising space?
    How big is the Consumer Electronics space? All gadgets, tvs, pcs etc)
    How big is point of sale market?
    How big is book distribution space?
    How big is the digital healthcare space?
    Add up all these markets. Add conservative growth rate.
    How does Apple’s market cap compare?
    Okay so plenty of room to grow and that is just with what is already in the market today. And yes I forgot a few.
    How big is the payment processing space?

  4. Unfortunately, this guy is way off base. Apple stocks has split twice since then, meaning you would own not 1,000 shares, but 4,000 shares worth aprox. 2,000,000 I think I’m correct

  5. Splitting has nothing to do with anything. Every time this happens it just means the stock is worth half of what it did the day before and it would be for the same company.

    1. Splitting definitely means a lot to the guy in the article. Each split would double his shares and with the current share price that means a lot of moolah.

      1. If a stock is $100 on Monday and you have two shares. the value of your holdings is $200. If the stock splits on Tuesday, making the shares worth $50, you now have four shares and the value of your holdings is now worth $200. Splitting does nothing to enhance the value of your holdings. You buy the stock based on how much you anticipate it will appreciate not the share price.

        1. I hate when this is said, I lived through it and a split makes a difference!

          I bought about 2500 worth of stock at $64 for a total of 38 shares. Stock split in 2005 and gave me 76 shares.

          If I still had 76 shares by stock it would be worth $40,280 today, but instead I have 38 shares because I had to sell half $20,140.

          The same day the share splits it doesn’t help. But a few months, a year, few years down the road it helps. It helped me, did I buy magic stock then?

          Luckily it did split because I would have had to sell all my stock and wouldn’t have anything right now. At least I could keep the original 38 shares I purchased. I wish it would split again.

          1. I respectfully disagree that a split makes a difference.  There may be a perceptual difference – you may THINK you somehow have more but, in fact, the value of your holdings is still the same.

            The difference may only be realized when, as you say, you might want to sell a small portion of your holdings. In that case, the opportunity cost of selling a split-adjusted share would be less than selling a non-split share. 

            Proportionally, your total investment would be reduced less by selling a split share than a non-split share. It’s niggling, I know ;^)

            1. Splits definitely make a difference long term. If Apple didn’t do its last 2 for 1 split you think the stock would be $1060 a share right now? Not likely.

  6. He may have been looking at my portfolio. I started controlling my retirement investments around the 1999 Y2K bubble. First shares were at the peek and bought all the way down to around the teens at that time. I always have some Apple stock (a lot now) and earned 37.6% average per year. I will be retiring later this year.

    What he is missing is that you had to understand what the potential was for Apple. There are few companies that have what Apple has and the time and place in history where it can happen. Apple will be studied for many years to see what others can apply to their company. I will always miss Steve Jobs and hope that the team he left behind has learned well from him.

      1. The guy who wrote “A Midsummer Knight’s Dream.” He also invented the world’s first computer with a truly user-friendly interface. You know, the Macbeth. It killed all the competition.

  7. Yep, that is already the split-adjusted price.

    I recall in March of 2003, Apple was $12 a share with $10 a share in cash, so the enterprise value was $2. I bought shares, but sold, after a 30% gain. Those shares were $6 after the split in 2005. I bought shares off and on after that as well, based upon my analysis of iPod sales. I didn’t buy and hold until 2007, after Steve intro’d the iPhone. Since then, I’ve accumulated 3000 shares, and am very happy with Apple.

    As for his “law of economics” reasoning, Apple has been in the computer business for several decades, and its margins have not decreased, but increased over time, while growing sales more than the PC market in something like 25 straight quarters. The nonsense about margin compression has just not shown itself to be applicable when Apple is the lowest cost manufacturer, with the highest margins. The other manufacturers always crap out first.

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