Before I even get into stocks, and more specifically into
Apple, I want to tell you about my two favorite times of the year. See, I’m a big sports fan. I loved watching Phil Mickelson win the Open
yesterday because I love golf. I like watching baseball, and
basketball, and college football, and golf, and tennis, and soccer. I love to play golf, or throw a baseball with
my younger son or daughter. I love to
shoot baskets with my college age kids, or take them to an occasional MLS
soccer, or NBA game. My wife and I play
tennis whenever we can. It’s part of who
we are.
Because I’m such a sports nut, I have two favorite times of
the year, March, and October. March is
amazing because it’s the NCAA Men’s Basketball Tournament. In my opinion, it is the best sporting event
of the whole year. March is also the
beginning of baseball season, the push for the playoffs in both hockey and NBA
basketball, and The Master’s Golf Tournament is just around the corner. I love October because of the World Series,
College Football back in full swing, and the start of the NBA and the NHL. I drive my family and friends nuts with my Bracket
Challenge (that’s for the NCAA Basketball Tournament for you non-sports fans)
in March and with my World Series predictions and NBA pre-season analysis in October. I sing lines from Christmas songs (“It’s the
most wonderful time of the year.”) when December is three months away or three
months past. If you are a sports fan like I am, these two times of the year are just plain exciting.
As an avid trader in the stock markets, I get four months
each year that bring me the same kind of excitement: January, April, July, and
October…..Earnings Season! It is that
truly magical time we get each quarter when up is down, front it back, and East
is West, because nobody really knows what is going to happen to a company's stock price when
it reports its quarterly earnings. Take
Apple, Inc. for example.
On the drive into my office this morning I heard that several
of the top analysts are split on what to expect when Apple, Inc. reports its
quarterly earnings on Tuesday at the close of the markets. One says the company is going to strongly
disappoint. Another says that new iPhone
activations are going to top expectations and the company is going to beat
projections and do great. Yet another is staying as
neutral as possible (coward) and saying it all depends on whether or not any
new products or significant product announcements come out in the conference
call. And that is the excitement in my
opinion: nobody knows.
There have been a lot of naysayers to Apple since the
company stock price hit an all-time high of $705.07 (the intra-day price was a
bit higher, but this is the highest closing day price the stock experienced) in
mid-September of last year. At that
time, the analysts’ consensus on Apple was that the stock would go to $1000 per
share before the end of 2013. 95% of all
the analysts at the time were wrong on picking a continued bullish direction on
Apple. It reminded me of the New England
Patriots undefeated regular season a few years ago. All the sports talking heads had them as a
lock for the Super Bowl that year. Well,
it was an amazing run, and the team got to the Super Bowl, but got defeated by
an upstart young quarterback names Eli Manning (I think he has an older brother
who plays too). The point is no one
could predict what would really happen.
Apple’s woes since hitting its high stock price have been
blamed on different things: 1) Lack of new products or innovations in the
pipeline. 2) The rise of other smart
phones to better compete with the iPhone (mostly the Samson Galaxy). 3) A slowdown in Mac sales as more and more
people move toward tablets and netbook style computers. 4) Stronger competing
products to the iPad. And let’s not forget
my personal favorite, 5) the loss of a far too young Steve Jobs, who has long
been identified as Apple. Apple is Jobs
and Jobs is Apple. I have heard rumor
that some guy named Tim Cook has taken over, but I still don’t really know who
he is.
I’m not quite ready or willing to make a prediction on what
the price of Apple stock will do after its announcement tomorrow, but I am more
than willing to tell you why I still think this is a great company. It’s simple for me really: great
products. Apple products, in my opinion,
still hold up strong, and in most cases better, than any competing product out
there when put to a head to head test. Let
me offer some evidence to my humble opinion:
Last week Microsoft had an incredibly disappointing earnings report. A big part of that was $900 million in tablet
inventory. See, Microsoft came out with
this great new tablet called Surface, which was going to be the first thing to
really challenge the iPad. Well, there
seems to be more of them sitting on Microsoft’s shelves than moving off the
shelves in stores. I’ve seen the
Surface. It’s not a bad tablet. Its only problem is that it’s not an iPad,
and iPad is the best tablet, hands down, on the market. I own a couple of iPads, and one other brand
of tablet (I’ll keep the name of it to myself).
The other brand tablet I have won’t charge anymore (and it is by the way
the newest of the three tablets I own).
I got online just last night to see if someone knew a great fix for
it. I was shocked when I found out how
many people had the same problem with the device and even more shocked at all
the other problems people have had with this device. And this device is one of the better sellers
out there. This got me thinking a
little, so I searched several other devices that have “challenged” the iPad in
recent years. I found the same
thing. Lots more problems than Apple’s
tablet.
I’ll give you another example: I have friends and family who have every
variety of smart phone on the market.
I’ll take my iPhone over any of them, any time. I know far more people who switch from other
smart phones to iPhone than the other way around, despite what you might hear
otherwise. It is just a better product. I told my wife last night that the next
version of iPhone will probably have a wider screen to compete better with the
Galaxy and some other smart phones. She
looked at me and said, “Why? This one fits perfect in my hand and in my
pocket”. Great point sweetheart. It’s a great phone the way it is.
From here you can go to laptops and desktop computers. Do you know anyone who owns a Mac, and other
brand computers? You probably do. And they probably all say the very same thing
I say: my Mac is the best of them. It’s
just a better product.
As long as the quality of the products is what it is, I
believe the competition still has a way to go to catch up to the quality of
Apple products. Would I like to see some
new things come from Apple? Sure I
would. And I actually disagree just a
little with my wife about the screen size on the iPhone. But, until someone has something better, I’m
still putting my money on Apple.
Like I said earlier, I don’t know what will happen to the
price of the stock after tomorrow’s earning announcement. I am not an analyst, I’m just a guy who uses
the products and trades the stock. I do
know this though, Apple is still a great company, and at its current price, I
believe still a good stock to own.
Here is one last thing to consider: When I look at stocks I want in my portfolio,
I look for companies that enjoy some health financially. My silly, common sense approach tells me that
if I fill my portfolio with healthy companies, I increase my chances of having a
healthy portfolio. Apple, Inc. currently
has about 40 billion dollars in cash, and 0 dollars in debt. If my portfolio is a barrel, there are no
rotten apples in it right now.
