Apple stock closes at new high of $136.70 as market cap inches toward $720 billion

AppleInsiderAppleInsider
Posted:
in AAPL Investors edited September 2020
Riding a wave of positive financial news and a rosy outlook for fiscal 2017, Apple stock touched $136.74 in intraday trading on Tuesday before closing at an all-time high of $136.70.




The finish continues a string of record-breaking trading days for Apple that began on Feb. 13, when AAPL stock ended the day at $133.29. A day later, shares reached $135.01 as Apple's market capitalization blew past $700 billion for the first time since 2015. The company's market cap stood at $719.19 billion at the end of trading today.

Prior to Tuesday, Apple most recently reset its trading high on Friday after company shares turned in a performance of $135 at the end of trading.

Partially driving today's stock surge was a research note from Morgan Stanley in which analyst Katy Huberty had raised her price on AAPL to $154, up from a previous target of $150, reports Business Insider.

Explaining the uptick to investors, Huberty called fears of a supposed decline in Chinese iPhone demand overblown, saying the company "is positioned to take net users from local Chinese smartphone brands." She forecasts one in five users who currently own a local brand smartphone could make the switch to Apple's platform. Considering the region's gigantic subscriber base, Apple stands to gain a huge number of new users over the next few quarters.

Huberty's note appears to be in direct response to Chinese market sales estimates research firm Canalys released last week. According to the report, Apple shipped 43.8 million iPhones in China during the December quarter, down 18.2 percent year-over-year. The figure put the company in fifth place behind Chinese manufacturers Huawei, Oppo, Vivo (a subsidiary of BBK) and Xiaomi, respectively. Independent findings published by IDC earlier this month also reflect an increase in local producer marketshare, but place Apple in fourth place ahead of Xiaomi.

Apple itself noted an 8 percent decline in China sales for its first fiscal quarter of 2017, with CEO Tim Cook blaming the slip on a weak yuan and a difficult Hong Kong market. Cook was quick to note Apple's Chinese numbers were actually up six points year-over-year on a "constant currency" basis.

Like other analysts, Huberty expects Apple's 2017 iPhone update to be a major revenue driver in China and beyond. Apple is widely rumored to launch an "iPhone 8" model this fall that will come packed with advanced technology like an edge-to-edge OLED display, wireless charging and a "glass sandwich" design. Recent predictions from analyst Ming-Chi Kuo point to the inclusion of a so-called "function area" that will take the place of a physical Touch ID home button, as well as a special front-facing camera with 3D mapping capabilities.

The forthcoming iPhone's bleeding edge design and feature additions will likely help Apple gain ground in China, a region that is "especially sensitive to new technology and form factor changes," Huberty said in today's note.
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Comments

  • Reply 1 of 27
    gmgravytraingmgravytrain Posts: 882member
    Just a reminder that back in 2015 Apple had reached a market cap value of around $775B and yet in 2016 slid down to around $530B which was below surging Alphabet's market cap and everyone knew then Apple was doomed, never to return to its former self. Anyway, Apple still has a distance to go to get back to its former market cap glory.

    Fortunately, during the past couple of years Apple has bought back about 2 billion shares which should make those dividends stretch a little further. There are Wall Street pundits saying how Apple is cheating to make it's EPS look higher than it should be due to those missing shares. Oh, well. You can't satisfy everyone. So many people seem concerned about Apple not being able to pay increased dividends to shareholders yet no one is concerned that Microsoft, with far more outstanding shares, being able to pay its dividends. So goes the bias against Apple.  As a shareholder, I hope Apple can continue this run for awhile before Wall Street again turns on Apple.
    edited February 2017
  • Reply 2 of 27
    jonagoldjonagold Posts: 31member
    Apple has plenty of cash to increase its dividend.  If they could repatriate the cash at a decent rate they wouldn't have to sell bonds to raise the funds but even then the bonds are cheaper than the lowest repatriation rate I've seen quoted so we'll see what management does. 

    We have to accept that Apple has a double standard against it. They have to outperform and out innovate by 5:1 in order for these analysts to not dump the stock. Everyone else somehow blows smoke and sees stock price increases. Just look at the P/E ratios for some of these companies in comparison.  Why does MSFT (and Alphabet) have a P/E of 30?  Did they announce a cure for cancer?  The highest P/E AAPL has had in the last five years was 18.5. Total market bias.
    radarthekat
  • Reply 3 of 27
    crowleycrowley Posts: 10,453member
    jonagold said:
    We have to accept that Apple has a double standard against it. They have to outperform and out innovate by 5:1 in order for these analysts to not dump the stock. 
    Have they been out-performing and out-innovating by 5:1 the past two weeks?
  • Reply 4 of 27
    kamiltonkamilton Posts: 282member
    Through 2013 - 2015, into early 2016, there was a significant amount of institutional investor fear that Android would win the mobile OS race.  These analysts equate market share with winning.  My impression is that the endgame of that race is evident in the US and other maturing markets.  By providing the best security and ecosystem in beautiful, reliable devices, Apple is proving to be the solid bet.  No company suffers more from manipulation and being misunderstood.  Solid value is kind of hard for wall street folks to comprehend.  We still need at least one new, amazing product this year to maintain share price momentum.
  • Reply 5 of 27
    carnegiecarnegie Posts: 1,078member
    gmgravytrain said:
    Just a reminder that back in 2015 Apple had reached a market cap value of around $775B and yet in 2016 slid down to around $530B which was below surging Alphabet's market cap and everyone knew then Apple was doomed, never to return to its former self. Anyway, Apple still has a distance to go to get back to its former market cap glory.

    Fortunately, during the past couple of years Apple has bought back about 2 billion shares which should make those dividends stretch a little further. There are Wall Street pundits saying how Apple is cheating to make it's EPS look higher than it should be due to those missing shares. Oh, well. You can't satisfy everyone. So many people seem concerned about Apple not being able to pay increased dividends to shareholders yet no one is concerned that Microsoft, with far more outstanding shares, being able to pay its dividends. So goes the bias against Apple.  As a shareholder, I hope Apple can continue this run for awhile before Wall Street again turns on Apple.
    I realize you aren't making the claim that it's cheating to buy back shares to make the EPS look better.

    But in response to such claims (or more particularly, to claims that it's cheating in the way it raises share prices): I think they misapprehend what it means to buy back shares and why, in some cases, it leads to higher stock prices. It only results in higher stock prices if the market eventually (collectively) decides that the company equity added to each share by the buybacks is worth more than the per-share value of the cash used for the buybacks (and which the company no longer has). In other words, buybacks ultimately only increase stock prices if the market eventually decides that shares were bought back at less than their fair value - i.e., that the company was previously being undervalued.

    After buybacks, each share represents ownership of a larger portion of the company and thus of a larger portion of future income streams. Buying back shares can, for whatever reasons, help the market to understand that a stock was previously being undervalued. But that doesn't mean that it fakes value that isn't there to begin with (or which isn't going to be created going forward).
  • Reply 6 of 27
    williamhwilliamh Posts: 1,033member
    sog35 said:
    jonagold said:
    Apple has plenty of cash to increase its dividend.  If they could repatriate the cash at a decent rate they wouldn't have to sell bonds to raise the funds but even then the bonds are cheaper than the lowest repatriation rate I've seen quoted so we'll see what management does. 

    We have to accept that Apple has a double standard against it. They have to outperform and out innovate by 5:1 in order for these analysts to not dump the stock. Everyone else somehow blows smoke and sees stock price increases. Just look at the P/E ratios for some of these companies in comparison.  Why does MSFT (and Alphabet) have a P/E of 30?  Did they announce a cure for cancer?  The highest P/E AAPL has had in the last five years was 18.5. Total market bias.
    Agree 100%

    As an investor I just deal with as a fact: Apple will 95% of the time be undervalued. The key is buying Apple when its GROSSLY UNDERVALUED. That is why I sold 70% of my holdings the last few weeks. Even though I know Apple's fair value is $150-$160 or even more, I don't trust Wall Street. I know that in 18 months they will make up some crap and drop Apple's stock price by 30-40%.  And that's the point I will reload on Apple shares.
    I don't always agree with you but on this I really do.  Something will happen, probably unrelated to Apple, that will cause shares to go irrationally down.  That's when to buy and how I made some decent money on Apple in recent years.
  • Reply 7 of 27
    MacProMacPro Posts: 19,727member
    All good.  However, I'll open the champaign when Apple is officially a 1 Trillion $ company.  Can't be more than a year or two off I'd think assuming the planet lasts that long.
  • Reply 8 of 27
    brucemcbrucemc Posts: 1,541member
    Hard to ever understand what sentiment drives a stock at any given time.  In Apple's case, because the iPhone represents such a large amount of Apple's revenue and profit, Wall Street has taken the view of Apple as "the iPhone company", and positive/negative sentiment here tends to be the driver of the stock.  Since Apple grew iPhone sales and revenue in fiscal Q1 2017, despite the "concerns" that iPhone 7 going to be "boring", and with the rumours of a visually distinct iPhone 8/X, Wall Street is back aboard the Apple bus (with its usual discount to the S&P 500 because, ya know, Apple has a history of underperforming..../sarcasm but that is Wall Street).  The market seems to price Apple on expectations for the next few quarters of iPhone sales.

    The reason many of us get frustrated (or laugh, depending on the day), is that Apple's success with iPhone, growing revenue, increasing services, and introducing new categories of products (wearables, like Apple Watch and AirPods) is fairly predictable.  They have been executing on this since 1997.  

    The market looks at Apple mostly as a device maker - sure a product was purchased today, but the only way that person will buy another Apple product in future is if that product is so much better than the competition in wiz-bang features and looks different.  While there is some dialog by analysts around the ecosystem, the market doesn't really believe that Apple has "a moat" - like MS had with Windows and the enterprise, Google with search/services, Amazon in e-commerce, and Facebook with social.  Even today, it is clear the market doesn't really factor in:
    - Tremendously high customer satisfaction
    - The growth in the installed base of all products (people are holding onto products longer, not abandoning them for other devices, for the most part)
    - Expanding ecosystem (of ancillary hardware products, software, services, content)
    - Growing services business that builds off of the increasing installed base

    Apple's business is creating customer's of Apple products, the vast majority of which stay with Apple.  The iPhone is the leading product in creating these new customers today, but the other product lines contribute as well.  The fact that most in the market do not try to track the installed base and its value shows they are relatively poor at gauging future company performance.
    radarthekatcharlesgres
  • Reply 9 of 27
    radarthekatradarthekat Posts: 3,842moderator
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    edited February 2017
  • Reply 10 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    MacPro said:
    All good.  However, I'll open the champaign when Apple is officially a 1 Trillion $ company.  Can't be more than a year or two off I'd think assuming the planet lasts that long.
    "The planet" is just fine. 🙄
  • Reply 11 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality. Most day traders lose money.***

    https://www.fool.com/investing/general/2014/06/01/why-warren-buffett-loves-when-his-stocks-plummet.aspx

    *** http://money.cnn.com/1999/08/09/markets/daytrade/
    edited February 2017 radarthekat
  • Reply 12 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    edited February 2017 radarthekat
  • Reply 13 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    sog35 said:
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    The thing is your success in Apple does not mean its a good strategy. Especially not today. Buying Apple at $1 in 1997 is very different from buying them at $136 today

    Apple was a massive anomaly. It has gone up 13000% since 2002.  The exception proves the rule. For every Apple there are dozens of Enron's, Sears, Kodak, GM, ect.  You are playing with fire if 50% or more of your portfolio is in one stock. 

    Again for 99.99% of situations it is not wise to invest 50% of your investments in a single stock.  Just because someone sold their house to buy lottery tickets and won $30 million does not mean everyone should. 
    Do not misunderstand. My circumstances are unique to me. I don't give out stock advice to others. Giving out stock advice to others is a game of chance and stupidity.
  • Reply 14 of 27
    MacProMacPro Posts: 19,727member
    SpamSandwich said:
    MacPro said:
    All good.  However, I'll open the champaign when Apple is officially a 1 Trillion $ company.  Can't be more than a year or two off I'd think assuming the planet lasts that long.
    "The planet" is just fine. 🙄
    Defensive answer for a joke? ;)
  • Reply 15 of 27
    radarthekatradarthekat Posts: 3,842moderator
    sog35 said:
    MacPro said:
    All good.  However, I'll open the champaign when Apple is officially a 1 Trillion $ company.  Can't be more than a year or two off I'd think assuming the planet lasts that long.
    whats the significance of $1 trillion? Does not mean much.

    Apple needs to go up about 40% to reach 1 trillion. If Apple does not buy any stock that would be a $191 share price. But Apple will buy stock so it needs to reach $200 a share.

    I doubt we reach $200 in 2 years.  Maybe in 5 years.

    This is the way I see it:

    1. We will see a strong push up with the iPhoneX hype. We probably reach $150-$160 this year
    2. Early next year we will peak at about $160-$165
    3. Then mid-2018 we will hear about weakening demand for the next iPhone. Price drops to $140-$150
    4. In 2019 it drops to $120. Bottom out. That's when I will LOAD UP
    5. By 2021 Services revenue will be MASSIVE. Apple will make a run at $200

    Hmm. Are you the same Sog35 who got Tim Cook's contribution so very wrong? Kidding. I'm kidding. Don't send me emails.

    The only thing you can reliably predict about the future is that most people who try to predict the future will be shown to be wrong.
    edited February 2017 SpamSandwich
  • Reply 16 of 27
    radarthekatradarthekat Posts: 3,842moderator
    sog35 said:
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    The thing is your success in Apple does not mean its a good strategy. Especially not today. Buying Apple at $1 in 1997 is very different from buying them at $136 today

    Apple was a massive anomaly. It has gone up 13000% since 2002.  The exception proves the rule. For every Apple there are dozens of Enron's, Sears, Kodak, GM, ect.  You are playing with fire if 50% or more of your portfolio is in one stock. 

    Again for 99.99% of situations it is not wise to invest 50% of your investments in a single stock.  Just because someone sold their house to buy lottery tickets and won $30 million does not mean everyone should. 
    Do not misunderstand. My circumstances are unique to me. I don't give out stock advice to others. Giving out stock advice to others is a game of chance and stupidity.
    I'll give out stock advice... haha. I'm always willing to do that. Here it is, and the reason nearly 60% of my net worth is invested in Apple along with some deep-in-the-money Apple bull call spreads. It's a pair of essays I wrote.  Here goes...

    INVESTMENT VERSUS SPECULATION

    The first level of wisdom a prospective investor hears and integrates is the old saw about diversification. And that's about as far as it goes for many.  The problem with diversification is that, even if you are diversified, you'll still likely have in your portfolio several holdings that don't fit the definition of a good investment.

    Those who go a bit farther in their studies begin to have a more nuanced comprehension and come to realize that not all businesses and opportunities represent investments. So what do these other businesses and opportunities represent if not investments? The answer is that anything that isn't an investment is speculation.  To be successful with individual stocks/businesses, you should carry in your mind a definition of these two concepts.  Here are my working definitions of the two terms:

    "An investment is a commitment to holding a security as long as the underlying fundamentals and business prospects remain intact." 

    Take Apple, for example. Apple shares are an investment as long as Apple continues to perform as well as it is currently performing. As long as it continues to generate the revenues and earnings it is currently generating.  Even if neither rise.

    "Speculation is a bet on some future outcome, either positive or negative, that would materially change the fortunes of a business."

    Note that the main difference here is that an investment relies upon the continuation of the status quo while speculation is a bet against the status quo.  

    GT Advanced Technologies (GTAT), a maker of solar manufacturing equipment, is an example of a speculative bet, and one that went terribly wrong for those who made that bet.  In 2012 and 2013, GTAT saw its solar business collapse under the weight of competition from Chinese manufacturers.  Late in 2013, GTAT partnered with Apple to manufacture sapphire displays, presumably for use on the iPhone 6.  GTAT needed that partnership to go well; it represented GTAT’s lifeline to a corporate reboot, a chance to reinvent itself in a new line of business in which it had little experience.  That reinvention, if successful, would materially enhance the value of the company.  If a failure, it would mark the collapse of GTAT as a viable business.  GTAT did fail, and filed for bankruptcy protection.  In the process, the share price went from a high of about $20 to about 40 cents.  Many of those holding the shares indignantly complained in online forums that their investment was wiped out by unscrupulous actions of GTAT's CEO and management team.  They weren’t wrong about the actions of GTAT’s management, but they were wrong in characterizing their GTAT holdings as an investment.  These people were speculating and paid a high price.

    It's those who don't understand the difference between an investment and a speculative bet who always end up convinced the market is rigged. These folks likely put money into one or more companies with business models that represented a speculative bet on some unlikely outcome, lost their money and associated that experience with the entire experience of participating in the market. How many times have you heard someone say the stock market is like a casino? Well, I liken the stock market, at the hands of a participant who has done his/her research and applied appropriate metrics, to a casino where you get to see your blackjack hand and the dealer’s up card before you place your bet and where you have the option of betting big, betting small, or not betting at all on each hand. The odds are strongly in your favor, but you can still do something foolish.  If you get your head on straight, stick to securities that represent a valid investment according to the above definition, and avoid speculation, at least until you have learned the hedging and other strategies associated with successful speculation, you’ll increase both your chances of a successful investment career and your returns throughout that career.

    CONCENTRATION VERSUS DIVERSIFICATION

    With the above in mind, you also need to be able to follow, closely, your investments. To follow a business, you need to understand the business and its success factors, its marketplace, its competition, how it compares to that competition, what technological changes are on the horizon that might impact the business, the legal, regulatory, and political landscape associated with the business, etc. Even so-called professional analysts, because they attempt to cover multiple, often many, businesses, nearly always get it wrong on a large and well followed and reported-on business like Apple.  How many people can follow even three companies, in three different industries, with different metrics as measures of success? How many even know the metrics of success for even one company in which they take a position? Stock picking, itself, is for the vast majority of those who participate, casino betting. Diversification, in this context, is appropriate since you would want to limit exposure to any individual bet.

    With the definition of investment in hand, it's a matter of screening for companies that are structurally sound; strong earnings at a relatively low multiple, solid balance sheet with net tangible assets not far below total stockholder equity (i.e., little of the company's assets represented by the Goodwill and Intangible Assets line items), and plenty of cash/cash equivalents to carry the company through downturns or changes in the direction of the business.

    Also look for a history of organic growth versus acquisition-based growth, a strong brand and competitive position, no significant impediments to growth, no significant risks such as lawsuits or potential for lawsuits (think medical device manufacturers and the hip implant lawsuits that have cost them billions), and technological leadership (which can be associated with the company's product technology or associated with process technology or even marketing technology; you want some significant technology lead that gives the company a clear edge).

    There are other things to look for, some that depend upon the particular business. I look for a business that excels in whatever metrics are most critical for success and growth in the industry/segment in which the business participates. And it should be comprehensible to a non-expert in the field; buy what you know.

    The temperament and discipline to stay the course and not get thrashed moving from one stock to another can be bolstered by having strong confidence in the businesses in which you place your investable funds, so knowing the workings of each business and its competitive environment is key. And that leads to the question... how much can you know about 10 businesses versus two or three at-a-time?  The answer is obvious and points to the fact that you should consider concentrating your holdings only when you know a business cold, and diversify your holdings when you don’t.  And leave speculation to those who know how to win at that game.
    ai46brucemc
  • Reply 17 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    MacPro said:
    SpamSandwich said:
    MacPro said:
    All good.  However, I'll open the champaign when Apple is officially a 1 Trillion $ company.  Can't be more than a year or two off I'd think assuming the planet lasts that long.
    "The planet" is just fine. 🙄
    Defensive answer for a joke? ;)
    Why do you think it's defensive?
  • Reply 18 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    sog35 said:
    SpamSandwich said:
    sog35 said:
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    The thing is your success in Apple does not mean its a good strategy. Especially not today. Buying Apple at $1 in 1997 is very different from buying them at $136 today

    Apple was a massive anomaly. It has gone up 13000% since 2002.  The exception proves the rule. For every Apple there are dozens of Enron's, Sears, Kodak, GM, ect.  You are playing with fire if 50% or more of your portfolio is in one stock. 

    Again for 99.99% of situations it is not wise to invest 50% of your investments in a single stock.  Just because someone sold their house to buy lottery tickets and won $30 million does not mean everyone should. 
    Do not misunderstand. My circumstances are unique to me. I don't give out stock advice to others. Giving out stock advice to others is a game of chance and stupidity.
    ask any professional investor and they will say that investing 50% of their entire portfolio in one stock is crazy and dangerous.

    I was living crazy because Apple at $90-$120 was ridiculously cheap. I was willing to take the risk. But at $136 and 10% below fair value the risk isn't worth it.

    i still believe in the company.  That is why Apple is 15% of my portfolio and by far my biggest holding.
    To each their own.
  • Reply 19 of 27
    radarthekatradarthekat Posts: 3,842moderator
    sog35 said:
    sog35 said:
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    The thing is your success in Apple does not mean its a good strategy. Especially not today. Buying Apple at $1 in 1997 is very different from buying them at $136 today

    Apple was a massive anomaly. It has gone up 13000% since 2002.  The exception proves the rule. For every Apple there are dozens of Enron's, Sears, Kodak, GM, ect.  You are playing with fire if 50% or more of your portfolio is in one stock. 

    Again for 99.99% of situations it is not wise to invest 50% of your investments in a single stock.  Just because someone sold their house to buy lottery tickets and won $30 million does not mean everyone should. 
    Do not misunderstand. My circumstances are unique to me. I don't give out stock advice to others. Giving out stock advice to others is a game of chance and stupidity.
    I'll give out stock advice... haha. I'm always willing to do that. Here it is, and the reason nearly 60% of my net worth is invested in Apple along with some deep-in-the-money Apple bull call spreads. It's a pair of essays I wrote.  Here goes...

    INVESTMENT VERSUS SPECULATION

    The first level of wisdom a prospective investor hears and integrates is the old saw about diversification. And that's about as far as it goes for many.  The problem with diversification is that, even if you are diversified, you'll still likely have in your portfolio several holdings that don't fit the definition of a good investment.

    Those who go a bit farther in their studies begin to have a more nuanced comprehension and come to realize that not all businesses and opportunities represent investments. So what do these other businesses and opportunities represent if not investments? The answer is that anything that isn't an investment is speculation.  To be successful with individual stocks/businesses, you should carry in your mind a definition of these two concepts.  Here are my working definitions of the two terms:

    "An investment is a commitment to holding a security as long as the underlying fundamentals and business prospects remain intact." 

    Take Apple, for example. Apple shares are an investment as long as Apple continues to perform as well as it is currently performing. As long as it continues to generate the revenues and earnings it is currently generating.  Even if neither rise.

    "Speculation is a bet on some future outcome, either positive or negative, that would materially change the fortunes of a business."

    Note that the main difference here is that an investment relies upon the continuation of the status quo while speculation is a bet against the status quo.  

    GT Advanced Technologies (GTAT), a maker of solar manufacturing equipment, is an example of a speculative bet, and one that went terribly wrong for those who made that bet.  In 2012 and 2013, GTAT saw its solar business collapse under the weight of competition from Chinese manufacturers.  Late in 2013, GTAT partnered with Apple to manufacture sapphire displays, presumably for use on the iPhone 6.  GTAT needed that partnership to go well; it represented GTAT’s lifeline to a corporate reboot, a chance to reinvent itself in a new line of business in which it had little experience.  That reinvention, if successful, would materially enhance the value of the company.  If a failure, it would mark the collapse of GTAT as a viable business.  GTAT did fail, and filed for bankruptcy protection.  In the process, the share price went from a high of about $20 to about 40 cents.  Many of those holding the shares indignantly complained in online forums that their investment was wiped out by unscrupulous actions of GTAT's CEO and management team.  They weren’t wrong about the actions of GTAT’s management, but they were wrong in characterizing their GTAT holdings as an investment.  These people were speculating and paid a high price.

    It's those who don't understand the difference between an investment and a speculative bet who always end up convinced the market is rigged. These folks likely put money into one or more companies with business models that represented a speculative bet on some unlikely outcome, lost their money and associated that experience with the entire experience of participating in the market. How many times have you heard someone say the stock market is like a casino? Well, I liken the stock market, at the hands of a participant who has done his/her research and applied appropriate metrics, to a casino where you get to see your blackjack hand and the dealer’s up card before you place your bet and where you have the option of betting big, betting small, or not betting at all on each hand. The odds are strongly in your favor, but you can still do something foolish.  If you get your head on straight, stick to securities that represent a valid investment according to the above definition, and avoid speculation, at least until you have learned the hedging and other strategies associated with successful speculation, you’ll increase both your chances of a successful investment career and your returns throughout that career.

    CONCENTRATION VERSUS DIVERSIFICATION

    With the above in mind, you also need to be able to follow, closely, your investments. To follow a business, you need to understand the business and its success factors, its marketplace, its competition, how it compares to that competition, what technological changes are on the horizon that might impact the business, the legal, regulatory, and political landscape associated with the business, etc. Even so-called professional analysts, because they attempt to cover multiple, often many, businesses, nearly always get it wrong on a large and well followed and reported-on business like Apple.  How many people can follow even three companies, in three different industries, with different metrics as measures of success? How many even know the metrics of success for even one company in which they take a position? Stock picking, itself, is for the vast majority of those who participate, casino betting. Diversification, in this context, is appropriate since you would want to limit exposure to any individual bet.

    With the definition of investment in hand, it's a matter of screening for companies that are structurally sound; strong earnings at a relatively low multiple, solid balance sheet with net tangible assets not far below total stockholder equity (i.e., little of the company's assets represented by the Goodwill and Intangible Assets line items), and plenty of cash/cash equivalents to carry the company through downturns or changes in the direction of the business.

    Also look for a history of organic growth versus acquisition-based growth, a strong brand and competitive position, no significant impediments to growth, no significant risks such as lawsuits or potential for lawsuits (think medical device manufacturers and the hip implant lawsuits that have cost them billions), and technological leadership (which can be associated with the company's product technology or associated with process technology or even marketing technology; you want some significant technology lead that gives the company a clear edge).

    There are other things to look for, some that depend upon the particular business. I look for a business that excels in whatever metrics are most critical for success and growth in the industry/segment in which the business participates. And it should be comprehensible to a non-expert in the field; buy what you know.

    The temperament and discipline to stay the course and not get thrashed moving from one stock to another can be bolstered by having strong confidence in the businesses in which you place your investable funds, so knowing the workings of each business and its competitive environment is key. And that leads to the question... how much can you know about 10 businesses versus two or three at-a-time?  The answer is obvious and points to the fact that you should consider concentrating your holdings only when you know a business cold, and diversify your holdings when you don’t.  And leave speculation to those who know how to win at that game.
    I enjoyed that. Excellent. I agree with much of what you wrote.

    But would you have considered Enron an investment before they went down? I think many did. It was an old fashion energy company that seemed to be rock solid and was showing nice revenue and profit growth. Then BOOM. Gone. 

    I still believe diversification is important. Its just to risky to put your entire portfolio in 2 or 3 stocks. Even if one of them get crushed you will lose a massive amount of money. I agree that its very hard to follow and really know 10 companies or more. At this point I think I have a strong grasp of Apple and its business and will probably be an investor in Apple for several decades as long as they continue to show leadership.

    But I just can't see having 50%+ of my entire portfolio in a single company. Stuff can happen. Even to Apple. What if China completely closes its doors? What if Trump passes the 30% import tax? Apple could easily drop 40% in a few months. Its done that two times in the past 5 years in much less negative circumstances.

    So what is my current investment strategy?  Right now I put 60-80% of my money into very low fee index funds like Vanguard S&P500. That fund is up about 73% the last 5 years. Apple is up 76% the last 5 years. But just two months ago Apple was significantly under performing the S&P500 in the 5 year window.

    With the rest of the 20-40% of funds I use on individual stocks. I will usually have 1-4 stocks. So each position will at most only take up about 15-20% of my portfolio. Most will be under 10%.  I'm usually looking for deep value. Stocks that have been hammered because of short-term problems but are strong fundementally and for the long term.

    Regarding Enron, that would never make it to a significant portion of my portfolio for the same reason Chevron wouldn't.  Buy what you know.  I don't know the energy sector well enough to qualify any component as an investment.  And yet I've owned energy stocks, dry bulk shipping stocks, bank stocks, etc.  None of those industries I know well enough to put a significant portion of my investable capital into.  And so I diversify across multiple stocks and industries with some of my money.  If I don't know it cold, it goes in the diversify bucket.  

    But I worked for 26 years in the software and computer hardware business.  I'm a patented inventor, I've co-founded companies.  And so I know enough to grok Apple pretty deeply.  And I've made about, rough estimate, $900k on Apple since making my first trade in its options back in July 2011.  Only a bit later did I start owning shares.  I use options, to some extent, to profit from the swings, while holding the shares, for the most part, through the dips.  That helps on my taxes, but it's not the main reason I hold.  I hold because Apple meets my definition of an investment.  I have a very Buffett-like disposition when it comes to my core holdings.  
    SpamSandwichai46
  • Reply 20 of 27
    SpamSandwichSpamSandwich Posts: 33,407member
    radarthekat said:
    sog35 said:
    sog35 said:
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    The thing is your success in Apple does not mean its a good strategy. Especially not today. Buying Apple at $1 in 1997 is very different from buying them at $136 today

    Apple was a massive anomaly. It has gone up 13000% since 2002.  The exception proves the rule. For every Apple there are dozens of Enron's, Sears, Kodak, GM, ect.  You are playing with fire if 50% or more of your portfolio is in one stock. 

    Again for 99.99% of situations it is not wise to invest 50% of your investments in a single stock.  Just because someone sold their house to buy lottery tickets and won $30 million does not mean everyone should. 
    Do not misunderstand. My circumstances are unique to me. I don't give out stock advice to others. Giving out stock advice to others is a game of chance and stupidity.
    I'll give out stock advice... haha. I'm always willing to do that. Here it is, and the reason nearly 60% of my net worth is invested in Apple along with some deep-in-the-money Apple bull call spreads. It's a pair of essays I wrote.  Here goes...

    INVESTMENT VERSUS SPECULATION

    The first level of wisdom a prospective investor hears and integrates is the old saw about diversification. And that's about as far as it goes for many.  The problem with diversification is that, even if you are diversified, you'll still likely have in your portfolio several holdings that don't fit the definition of a good investment.

    Those who go a bit farther in their studies begin to have a more nuanced comprehension and come to realize that not all businesses and opportunities represent investments. So what do these other businesses and opportunities represent if not investments? The answer is that anything that isn't an investment is speculation.  To be successful with individual stocks/businesses, you should carry in your mind a definition of these two concepts.  Here are my working definitions of the two terms:

    "An investment is a commitment to holding a security as long as the underlying fundamentals and business prospects remain intact." 

    Take Apple, for example. Apple shares are an investment as long as Apple continues to perform as well as it is currently performing. As long as it continues to generate the revenues and earnings it is currently generating.  Even if neither rise.

    "Speculation is a bet on some future outcome, either positive or negative, that would materially change the fortunes of a business."

    Note that the main difference here is that an investment relies upon the continuation of the status quo while speculation is a bet against the status quo.  

    GT Advanced Technologies (GTAT), a maker of solar manufacturing equipment, is an example of a speculative bet, and one that went terribly wrong for those who made that bet.  In 2012 and 2013, GTAT saw its solar business collapse under the weight of competition from Chinese manufacturers.  Late in 2013, GTAT partnered with Apple to manufacture sapphire displays, presumably for use on the iPhone 6.  GTAT needed that partnership to go well; it represented GTAT’s lifeline to a corporate reboot, a chance to reinvent itself in a new line of business in which it had little experience.  That reinvention, if successful, would materially enhance the value of the company.  If a failure, it would mark the collapse of GTAT as a viable business.  GTAT did fail, and filed for bankruptcy protection.  In the process, the share price went from a high of about $20 to about 40 cents.  Many of those holding the shares indignantly complained in online forums that their investment was wiped out by unscrupulous actions of GTAT's CEO and management team.  They weren’t wrong about the actions of GTAT’s management, but they were wrong in characterizing their GTAT holdings as an investment.  These people were speculating and paid a high price.

    It's those who don't understand the difference between an investment and a speculative bet who always end up convinced the market is rigged. These folks likely put money into one or more companies with business models that represented a speculative bet on some unlikely outcome, lost their money and associated that experience with the entire experience of participating in the market. How many times have you heard someone say the stock market is like a casino? Well, I liken the stock market, at the hands of a participant who has done his/her research and applied appropriate metrics, to a casino where you get to see your blackjack hand and the dealer’s up card before you place your bet and where you have the option of betting big, betting small, or not betting at all on each hand. The odds are strongly in your favor, but you can still do something foolish.  If you get your head on straight, stick to securities that represent a valid investment according to the above definition, and avoid speculation, at least until you have learned the hedging and other strategies associated with successful speculation, you’ll increase both your chances of a successful investment career and your returns throughout that career.

    CONCENTRATION VERSUS DIVERSIFICATION

    With the above in mind, you also need to be able to follow, closely, your investments. To follow a business, you need to understand the business and its success factors, its marketplace, its competition, how it compares to that competition, what technological changes are on the horizon that might impact the business, the legal, regulatory, and political landscape associated with the business, etc. Even so-called professional analysts, because they attempt to cover multiple, often many, businesses, nearly always get it wrong on a large and well followed and reported-on business like Apple.  How many people can follow even three companies, in three different industries, with different metrics as measures of success? How many even know the metrics of success for even one company in which they take a position? Stock picking, itself, is for the vast majority of those who participate, casino betting. Diversification, in this context, is appropriate since you would want to limit exposure to any individual bet.

    With the definition of investment in hand, it's a matter of screening for companies that are structurally sound; strong earnings at a relatively low multiple, solid balance sheet with net tangible assets not far below total stockholder equity (i.e., little of the company's assets represented by the Goodwill and Intangible Assets line items), and plenty of cash/cash equivalents to carry the company through downturns or changes in the direction of the business.

    Also look for a history of organic growth versus acquisition-based growth, a strong brand and competitive position, no significant impediments to growth, no significant risks such as lawsuits or potential for lawsuits (think medical device manufacturers and the hip implant lawsuits that have cost them billions), and technological leadership (which can be associated with the company's product technology or associated with process technology or even marketing technology; you want some significant technology lead that gives the company a clear edge).

    There are other things to look for, some that depend upon the particular business. I look for a business that excels in whatever metrics are most critical for success and growth in the industry/segment in which the business participates. And it should be comprehensible to a non-expert in the field; buy what you know.

    The temperament and discipline to stay the course and not get thrashed moving from one stock to another can be bolstered by having strong confidence in the businesses in which you place your investable funds, so knowing the workings of each business and its competitive environment is key. And that leads to the question... how much can you know about 10 businesses versus two or three at-a-time?  The answer is obvious and points to the fact that you should consider concentrating your holdings only when you know a business cold, and diversify your holdings when you don’t.  And leave speculation to those who know how to win at that game.
    I enjoyed that. Excellent. I agree with much of what you wrote.

    But would you have considered Enron an investment before they went down? I think many did. It was an old fashion energy company that seemed to be rock solid and was showing nice revenue and profit growth. Then BOOM. Gone. 

    I still believe diversification is important. Its just to risky to put your entire portfolio in 2 or 3 stocks. Even if one of them get crushed you will lose a massive amount of money. I agree that its very hard to follow and really know 10 companies or more. At this point I think I have a strong grasp of Apple and its business and will probably be an investor in Apple for several decades as long as they continue to show leadership.

    But I just can't see having 50%+ of my entire portfolio in a single company. Stuff can happen. Even to Apple. What if China completely closes its doors? What if Trump passes the 30% import tax? Apple could easily drop 40% in a few months. Its done that two times in the past 5 years in much less negative circumstances.

    So what is my current investment strategy?  Right now I put 60-80% of my money into very low fee index funds like Vanguard S&P500. That fund is up about 73% the last 5 years. Apple is up 76% the last 5 years. But just two months ago Apple was significantly under performing the S&P500 in the 5 year window.

    With the rest of the 20-40% of funds I use on individual stocks. I will usually have 1-4 stocks. So each position will at most only take up about 15-20% of my portfolio. Most will be under 10%.  I'm usually looking for deep value. Stocks that have been hammered because of short-term problems but are strong fundementally and for the long term.

    Regarding Enron, that would never make it to a significant portion of my portfolio for the same reason Chevron wouldn't.  Buy what you know.  I don't know the energy sector well enough to qualify any component as an investment.  And yet I've owned energy stocks, dry bulk shipping stocks, bank stocks, etc.  None of those industries I know well enough to put a significant portion of my investable capital into.  And so I diversify across multiple stocks and industries with some of my money.  If I don't know it cold, it goes in the diversify bucket.  

    But I worked for 26 years in the software and computer hardware business.  I'm a patented inventor, I've co-founded companies.  And so I know enough to grok Apple pretty deeply.  And I've made about, rough estimate, $900k on Apple since making my first trade in its options back in July 2011.  Only a bit later did I start owning shares.  I use options, to some extent, to profit from the swings, while holding the shares, for the most part, through the dips.  That helps on my taxes, but it's not the main reason I hold.  I hold because Apple meets my definition of an investment.  I have a very Buffett-like disposition when it comes to my core holdings.  
    I completely agree with Buffet's buy and hold philosophy.
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