Wrong
Apple is now trading at the same multiple as the S&P 500 using current earnings estimates of 42$ a share. It is easy to make the case that those estimates are low and the real number may be $50-55 per share throw in the 100 billion in cash and the best executing company in the world is still cheap compared to the benchmark.
The reason AAPL is soaring has to do with sound investment theory and a slew of analyst upgrades. Morgan Stanley published a piece a few days ago making the Bull case for a share price of $960 in CY13, Morgan Stanley! With price targets being raised daily above $700 per share AAPL still has room to run But you are correct there are many stocks that are capable of outperforming AAPL from this point on. As a long term investor in AAPL who has enjoyed the three year run from $78.20 in January of 09 I am staying long for the time being.
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It has been replaced by the law of larger markets.
It's as I told a close friend yesterday, buying AAPL is not an investment strategy. There are two important words there: "investment" and "strategy".
Investment requires active research, and making decisions not based on speculative plays but a sound analysis of the value of the asset being acquired. Hearing about a company as ubiquitous as Apple and then jumping on board on the assumption that it'll keep going up (remember the housing market?) is not investing.
If all of Apple's enterprise were struck by a meteor tomorrow and wiped off the face of the planet, would the average Apple speculator be well insulated from that catastrophe in the rest of their portfolio. Would their "sit and presume infinite growth" tack work with the broader market?
If the answer to questions like these is "no" then whatever else you want to call it, it's not investing, and it's not a strategy.
Spend less time beating yourself up for "shoulda, woulda, coulda" on a company that could have just as easily gone the other way... and start beefing up your knowledge of investing, and insulate yourself against potential catastrophic loss. THAT, and not consistent huge wins, is what will growth your wealth tremendously in the long term.
Chasing unsustainable returns is a sure fire way to expose your principal to risk of loss... and that kind of loss compounds over time. I don't miss the AAPL boat because I have much more stable long term investments that are actually providing pretty stellar returns, very close to Apple's.... but without the volatility of the umpteen zillion speculators who are all sitting and hoping with their eyes closed and ears shut.
I'm not saying that Apple will do terribly, but Apple's book value is well below 600 dollars per share. So the difference is owing entirely to speculation on where they will go in the future. That works perfectly as long as Apple keeps producing double digit growth infinitely... but its the "infinitely" part that is a statistical impossibility. Growth rates have to shrink at that scale because a) Apple is gaining share of wallet much faster than the number of wallets or size of wallets is increasing, and b) Apple has to produce exponentially more marginal revenue each quarter just to maintain the same growth rate mathematically.
And then there's the Steve factor... any time a business's image and success are so inextricably tied to an iconic figure you cannot top that. No one will ever take the reins of Apple with a greater vested interest than Steve had. No visionary of Steve's caliber will prefer to work for Apple over starting his own company.
A shrewd investor is like a good hockey player... skate to where the puck is going next, not to where it is now.
Apple is now trading at the same multiple as the S&P 500 using current earnings estimates of 42$ a share. It is easy to make the case that those estimates are low and the real number may be $50-55 per share throw in the 100 billion in cash and the best executing company in the world is still cheap compared to the benchmark.
The reason AAPL is soaring has to do with sound investment theory and a slew of analyst upgrades. Morgan Stanley published a piece a few days ago making the Bull case for a share price of $960 in CY13, Morgan Stanley! With price targets being raised daily above $700 per share AAPL still has room to run But you are correct there are many stocks that are capable of outperforming AAPL from this point on. As a long term investor in AAPL who has enjoyed the three year run from $78.20 in January of 09 I am staying long for the time being.
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What happened to the Law of Large Numbers that Apple was talking about at the 300 billion market cap mark?
It has been replaced by the law of larger markets.