Last Year’s Apple Talk

Apple’s Worldwide Developers Conference (WWDC) apparently disappointed the market. The stock was down just a bit yesterday, although not by very much. This also indicates the market wasn’t expecting much from Apple either.

I’ll be blunt. Apple’s performance has been horrible this year. This doesn’t mean that the company is in the tank. It just means that market participants have severely changed their mind on the company’s value. This is why the market can seem so fickle. It’s not just how a company is doing. It depends on what the rest of the market thinks too.

Last year around this time I was having a conversation with a guy who wanted to hire an advisor who knew the market, inside and out. He didn’t want to gamble on penny stocks. He just wanted someone who would be able to pick good stocks…..you know….like Apple.

Here is a chart of Apple vs. the S&P 500 index over the last year. The S&P 500 index is up 26.97%. Apple is down -22.23%. This is serious money we are talking about. With an investment portfolio of $5 million, the spread between the two outcomes is already about $2.4 million in just a year’s time. Imagine the spread in outcomes over 10 years, 50 years, or 100 years! This is exactly how estates get destroyed, and why families don’t make the returns they could get by following relatively simple strategies.

 

apple vs S&P 500

A year ago when I had this conversation, I told this man that I did know the market inside and out, which was precisely why I advised him against attempting such a strategy.The guy was very nice and very smart, but I suppose he didn’t believe me because he never hired me.

I could have told him I’d “give it a shot.” I could have told him that I agreed Apple was a great company, so let’s buy it along with some other ‘quality stocks.’ I would have had a much better chance of getting his business. This is what most advisors probably would have done. You know….work with a client to help them hang themselves (Morgan Stanley did a great job of this with the Facebook IPO). But now where would I be? He’d be disappointed with his performance, and I wouldn’t be able to look myself in the mirror, knowing that I played a role in leading him to the slaughter.

I probably turn down and/or push away a lot of business because I insist on investing the right way. In the end, I know I’ll be happy I did.

 Photo by klaus

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