Apple's surging valuation distorting stock market indexes

Posted:
in AAPL Investors edited January 2014


The rapid escalation of Apple's profits and corporate valuation are overshadowing the performance of other companies so much that analysts are highlighting how different the market would look like without Apple.



In an attempt to provide a clearer picture of American corporate earnings, a report by the Wall Street Journal notes that UBS analyst Jonathan Golub has published two versions of his quarterly earnings picture for the S&P 500, one including Apple, and one without.



The contrast highlights how much Apple contributed to the index's 6.6 percent year over year increase in the winter quarter; without the company, the gain drops to just 2.8 percent. With Apple, the S&P 500's profit margins were up 0.05 percent; without they were down 0.22 percent.









Golub wrote, that "by stripping away that one single company, it is like seeing light through a prism—you see things more clearly."



The report cited analyst Barry Knapp of Barclays Capital as saying, "what's happening with Apple is real, because Apple's earnings are real and any wealth accruing to Apple gets into the hands of U.S. shareholders. But to actually be able to look at trends and look at what's happening to [other companies], not just the one that's so exceptional, it is important to strip Apple out."



Were Apple in the Dow Jones Industrial Average



Alternatively, blogger Adam Nash of Greylock Partners notes that, had Apple been added to the Dow Jones Industrial Average rather than Cisco back in the summer of 2009 when the DJIA was last redefined, the Dow would be up over 2,000 points.



Nash noted on Monday that Dow closed at 12,874.04, and had it included Apple rather than Cisco, it would instead be at 14,926.95, 800 points higher than its peak set in April 2008.



"Can you imagine what the daily financial news of this country would be if every day the Dow Jones was hitting an all-time high? How would it change the tone of our politics? Would we all be counting the moments to Dow 15,000?" Nash wrote.



"Look, I’m just going to say it. The Dow Jones Industrial Average is ridiculous," he observed, adding, "You may not realize this, but the Dow Jones Industrial Average, the “Dow” that everyone quotes as representative of the US stock market, and sometimes even a barometer of the US economy, is a mathematical farce."



[ View article on AppleInsider ]

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Comments

  • Quote:
    Originally Posted by AppleInsider View Post


    The rapid escalation of Apple's profits and corporate valuation are overshadowing the performance of other companies so much that analysts are highlighting how different the market would look like without Apple.








    This shit is surreal.
  • apple ][apple ][ Posts: 8,232member
    Well, that's it! I finally made my move and I opened a trading account today.



    In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.



    From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.
  • sevenfeetsevenfeet Posts: 335member
    This has been discussed in some financial circles when the question is posed "Why isn't Apple in the Dow Jones Industrial Average", in other words the top 30 stocks traded. Apple certainly falls into that category as the world's most valuable company. The problem is that Apple's growth has been so ridiculously out of what is normal for a big cap stock that apparently there wasn't a way to add Apple to the index and keep from radically distorting it. In other words, Apple's success isn't the same as all the other companies...its moving much faster than the rest of the economy and it would seem like the Dow was far better than the rest of the economy.
  • sixnahalffeetsixnahalffeet Posts: 99member
    I was asked in 1999 by a group of guys at work who wanted to pool their money and buy a good stock, if Apple would be a good investment (if you remember many people had written Apple back off then). I said that there is no way that Apple would die, they are too innovative, more so than the average person realizes. I recommended that they invest in Apple. A few of them did, some later got scared and pulled out. The 2 that stayed in are soo happy! I wish I had a few bucks to rub together back then. I was just a broke tech lover and Apple was trading at around $50.
  • aaarrrggghaaarrrgggh Posts: 1,526member
    Wow... I knew it was a significant impact, but didn't realize it was that dramatic. It almost gives credence to "short the market, go long on AAPL" strategies. Unfortunately, it is hard to figure out how long-term it will work for AAPL to be so dominant. There has to be a backlash in a few years...
  • mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by Sevenfeet View Post


    "Why isn't Apple in the Dow Jones Industrial Average", in other words the top 30 stocks traded.



    Toy companies are not considered industrial.



    jk
  • cy_starkmancy_starkman Posts: 488member
    "the ?Dow? that everyone quotes as representative of the US stock market, and sometimes even a barometer of the US economy, is a mathematical farce.""



    Economics is a mathematical farce so this should not be surprising.
  • secular investorsecular investor Posts: 205member
    Quote:
    Originally Posted by Apple ][ View Post


    Well, that's it! I finally made my move and I opened a trading account today.



    In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.



    From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.



    Apple ][, What took you so long?



    Still, better late than never.



    Despite the strong rise in recent years, Apple is still incredibly good value. I think you will be amazed, and most pleasantly rewarded, by just how much Apple will grow over the next several years.



    Apple still has huge headroom to grow. The iPhone only has 5% to 9% market share of mobile phones. The iPad is still at a very early stage, with tablet sales expected to increase nearly 10 fold to overtake PC sales.



    Anyway, best of luck!
  • apple ][apple ][ Posts: 8,232member
    Quote:
    Originally Posted by Secular Investor View Post


    Apple ][, What took you so long?



    Money, mainly.



    Quote:
    Originally Posted by Secular Investor View Post


    Still, better late than never.



    Despite the strong rise in recent years, Apple is still incredibly good value. I think you will be amazed, and most pleasantly rewarded, by just how much Apple will grow over the next several years.



    Apple still has huge headroom to grow. The iPhone only has 5% to 9% market share of mobile phones. The iPad is still at a very early stage, with tablet sales expected to increase nearly 10 fold to overtake PC sales.



    Even though I don't know much about stocks at all, I do know about Apple, and I agree with you.



    Quote:
    Originally Posted by Secular Investor View Post


    Anyway, best of luck!



    Thanks!
  • sacto joesacto joe Posts: 604member
    Quote:
    Originally Posted by Apple ][ View Post


    In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.



    Good timing, too! Looks like Apple stock is starting its "consolidation" phase. It's down below $500 right now. I've been "all in" for a year and a half now, and no regrets.
  • ltmpltmp Posts: 204member
    Quote:
    Originally Posted by Apple ][ View Post


    Well, that's it! I finally made my move and I opened a trading account today.



    In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.



    From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.



    Welcome to the nightmare/wet dream. On days like today, I watch the ticker with my cursor on the sell button.



    Today, I timed it well. I sold 100 at $525, then bought 105 shares back (using an extra $250 in my account).



    Shares climbed back to $512, I breathed a deep sigh of relief, then went to lunch.



    Now I just want to cry. If I'd only sold it all at $525, then waited a day or two.



    The wet dream part? I'm still up 25% so far this year.



    That will be your life from now on
  • a_greera_greer Posts: 4,594member
    Quote:
    Originally Posted by Apple ][ View Post


    Well, that's it! I finally made my move and I opened a trading account today.



    In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.



    From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.



    Good call, buy high sell low...wait a sec...
  • ezduzitezduzit Posts: 158member
    apple is always the poster child.



    why not add google & berkshire together and make a chart.



    averages are nice to look at, after the fact.



    just remember, while the all time high dow is doable, the nasdaq is still close to around half of its all time high.
  • fast fred 1fast fred 1 Posts: 294member
    "APPLE FOR PRESIDENT'..well it could happen.
  • anantksundaramanantksundaram Posts: 17,187member
    Quote:
    Originally Posted by I am a Zither Zather Zuzz View Post


    This shit is surreal.



    But also stupid. 'Stripping away' one company will also strip away component makers, makers of plastics/rubber/metal, retailers, distribution and logistics firms, producers of collateral gear, music companies, advertising agencies, etc. In other words, an entire web of production interdependencies in the real economy.



    Indeed, stripping away a company like GM, with one-tenth of Apple's market cap, will take a much smaller bite out of the index, but a much bigger slice of the real economy.



    In other words, an entirely bogus analysis meant for breathless, shallow media consumption.
  • fast fred 1fast fred 1 Posts: 294member
    Quote:
    Originally Posted by LTMP View Post


    Welcome to the nightmare/wet dream. On days like today, I watch the ticker with my cursor on the sell button.



    Today, I timed it well. I sold 100 at $525, then bought 105 shares back (using an extra $250 in my account).



    Shares climbed back to $512, I breathed a deep sigh of relief, then went to lunch.



    Now I just want to cry. If I'd only sold it all at $525, then waited a day or two.



    The wet dream part? I'm still up 25% so far this year.



    That will be your life from now on



    Yeah I bought 100 at $100.00. 2 weeks it split 2 for 1 , 30 days later it was 28.00.....Sept. 2001:
  • anantksundaramanantksundaram Posts: 17,187member
    Quote:
    Originally Posted by LTMP View Post


    That will be your life from now on



    This is will be Apple]['s life only if he's interested in losing his money sooner than later, wasting his time in the process, as a day-trader.



    My suggestion for Apple][ (congrats, btw): Buy, hold, forget about it. Take the long view. You'll likely be wealthier (and saner).
  • apple ][apple ][ Posts: 8,232member
    Quote:
    Originally Posted by a_greer View Post


    Good call, buy high sell low...wait a sec...



    Well, I don't exactly own a time machine which I can jump into and pick up some shares for real cheap. If I could've bought years ago, then I would have.



    And I haven't bought anything yet. I believe that AAPL is going to continue to rise longterm, and in that case, I'll have to enter the game sometime if I wish to be a participant.
  • apple ][apple ][ Posts: 8,232member
    Quote:
    Originally Posted by anantksundaram View Post


    This is will be Apple]['s life only if he's interested in losing his money sooner than later, wasting his time in the process, as a day-trader.



    My suggestion for Apple][ (congrats, btw): Buy, hold, forget about it. Take the long view. You'll likely be wealthier (and saner).



    Oh yeah, I wouldn't worry about that.



    I admit to knowing very little about the market, and I am only testing the waters. I used to play a bit of poker for money online before the FEDS stepped in and shut down the biggest sites a while ago, so I'm very used to cash swings that go up and down. I consider myself to be untiltable, to use poker terminology. And in poker, you can lose 100% of your cash in 1 hand. Even if AAPL were to go down with some percent, then big deal, it wouldn't phase me. I doubt that AAPL will ever be worth zero cents, so in that way, I see stocks as much safer and easier to play than poker. I'm just treating this stocks business like a video game.



    I'm not planning on day trading, like those people who buy and sell a few minutes later. I just figure that I'd rather put my little bit of extra cash into AAPL instead of keeping it in some bank that pays virtually nothing in interest.
  • gtrgtr Posts: 3,179member
    Quote:
    Originally Posted by Apple ][ View Post


    Oh yeah, I wouldn't worry about that.



    I admit to knowing very little about the market, and I am only testing the waters. I used to play a bit of poker for money online before the FEDS stepped in and shut down the biggest sites a while ago, so I'm very used to cash swings that go up and down. I consider myself to be untiltable, to use poker terminology. And in poker, you can lose 100% of your cash in 1 hand. Even if AAPL were to go down with some percent, then big deal, it wouldn't phase me. I doubt that AAPL will ever be worth zero cents, so in that way, I see stocks as much safer and easier to play than poker. I'm just treating this stocks business like a video game.



    I'm not planning on day trading, like those people who buy and sell a few minutes later. I just figure that I'd rather put my little bit of extra cash into AAPL instead of keeping it in some bank that pays virtually nothing in interest.



    You are all brave men. I admire you.



    I would do the same, as I have 100% faith in Apple.



    Unfortunately, I have even more faith in America's inability to pay it's debts in the near future and, if they end up defaulting, like they probably will, it ain't gonna pretty what will happen to stock markets all around the world.



    That's when I plan to buy in.



    For those of you interested, check out www.usdebtclock.org



    (The U. S. debt went up eight million dollars in the time it took me to type this post)
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