Over the twelve years or so that I have been contributing here, I have made my share of bad calls and mistakes, but there are some things that I have said consistently that have proven to be right, and which would have significantly rewarded readers who listened and acted on them.
One would be that every market drop over that time has proven to be a long-term buying opportunity, as I have always said it would, based on the simple fact that the major indices are currently at or near their all-time highs. And when it comes to individual stocks, there are some big, well-run companies whose stocks follow the same pattern as the indices. They are worth buying and holding, even as they fall in and out of favor, with the out of favor periods just resulting in a discount for investors.
That may sound obvious with hindsight, but you would be surprised how many people lose sight of it when a pessimistic mood takes hold.
Apple (AAPL) is a good example. Over the last twelve years, I have remained consistently bullish on Apple in what I have written and I have held a long position in my own account to which I have often added when people started to listen to the naysayers. There has been no shortage of them but, as the chart below comparing AAPL to SPY, the S&P 500 tracking ETF (green line), over the last dozen years clearly shows, they have always been wrong.
I assume it is born of a desire to be “controversial,” but countless people, including many who should know better, have pronounced Apple dead as an investment over that time. The company has been accused of being too dependent on the iPhone or wasting money researching and developing other products, or they have been too involved or not involved enough in China, or some other nonsense. The desire to criticize rather than analyze is so strong that those contradictory accusations have often come from the same people, each within a short time of the other.
Notably, though, the periodic pessimism comes almost entirely from pundits like me, not from Wall Street. The professional Wall Street analyst community has not often fallen for the temptation to attack Apple just because they are successful. They have remained overwhelmingly positive on the stock and still are. The latest survey of analysts’ recommendations, for example, shows not a single firm with a “sell” rating or similar on AAPL. That is because they understand that the way Apple works, while it may not be sensational, is effective.
In their early days, they were known as an innovative and disruptive company, an image that they have worked hard to maintain. In reality, though, what they have consistently done is to take technology developed by others and refine it. Blackberry (BB) made the first smartphone and the Palm Pilot was a thing long before there was an iPad, but Apple’s version of those things improved on them and, with the help of some great marketing, were much more successful commercially.
Blackberrys and Palm Pilots came and went, but Apple’s drip, drip, drip of improvements and upgrades have kept their products as market leaders for a decade or so.
When you hear the latest criticism of Apple, that they have been left behind in the race to develop AI, understand that based on the company’s history, that is probably a choice. They are quite happy to let others compete against each other, secure in the knowledge that whatever they come up with, Apple will eventually develop the most user friendly, best-selling version of it. They may not openly admit that at their developer’s conference next month when they are expected to clarify their AI program, but if you read between the lines, that is probably what they will say.
The bear case against Apple rests on the idea of market saturation and, even though they have been consistently wrong for a decade or so, it could be that Apple’s critics have a point this time when they say that there are only so many camera and chip upgrades that will stimulate sales of iPhones, and that we have reached that limit.
However, phones with AI capability will change that completely. Given Apple’s history of marketing new technologies, do you want to bet against them driving massive sales over the next few years by the inclusion of AI? No, nor do I. Then add in the fact that these days, each iPhone sale drives opportunities for repeating service revenue from customers, and the future for AAPL looks quite bright.
I am actually hoping that one of the Apple bears emerges again quite soon and garners a lot of publicity for a call that AAPL will drop below $100 or some other such “sensational” prediction. That big drop won’t happen, of course, but it might prompt some selling, which would give me an opportunity to add to my position once again at a discount, something I would quite happily do!
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
