“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.]