Is it still worth buying stock in Apple?

As I’m sitting here making investment decisions at one o’clock in the morning, trying to decide if I should put more money in this index fund or that one, or buy into another one that’s doing really well and has been since it’s inception (but would require a bigger upfront lump sum to get in), I looked at Apple’s stock, just because that’s where my train of thought took me. In the last year it’s gone from about $350 to about $650 and I have to wonder, can it really go any higher? Can it double again in 12 months, can it even tack on another hundred dollars? On the one hand, I’d only buy ONE share, but OTOH, buying ONE share 12 months ago would have netted a pretty nice return of nearly double. Also, keep in mind, the iPhone 5 is due out in the next month or two.
A little bit of research tells me that if I were to take that same $650 and buy Verizon and AT&T instead and they increase the same amount in the next year as they did in the last year, I’d be up a hundred. Even more research (done previously here, other places and empirically) tells me to knock it off and stick with the index funds. Of course, it’s fun to have a few single stocks in the mix.

Funny you should ask, because I just read a news article entitled:
**Google Files New Patent Lawsuit Against Apple, Seeks To Block IPhone, IPad & Mac Imports To U.S.
**It’s actually Motorola, a wholly-owned subsidiary of Google.

This one should at least be good for some schadenfreude, now that Apple gets a little taste of its own medicine.

The stock is at a record high right now. Typically, isn’t that a bad time to buy? Their new products will hit the market and, once the thrill is gone, wouldn’t you expect them to sink back some?

Seems like we won’t know what’s going on with that for a little while. That last lawsuit (linked in the article) mentions one of the infringements is over 3G technology so that probably won’t have much of an effect on the iPhone 5 since I assume they dropped a new 3G chipset in that won’t infringe and/or properly licensed it from Motorola. Of course, there’s a lot of iPhone 3G, 4 and 4S (not on VZW) out there that they’ll probably have to payout on if they lose.

Having said that, there won’t be a world without iDevices or Apple computers any time soon even if they have to pay off Moto one way or another and I can’t seem them selling off the i brand to another company in the near future but I still have to wonder if, after doubling in the last 12 months, if it can get higher or if that was just a temporary spike and it’s going to come back down.
Perhaps buying a share now and selling it after the iPhone 5 is released might be the best advice. Get in, Get out. I’m no Day Trader. I’m not trying to maximize every cent. I’m not going to stress out because selling one day earlier or later might have meant an extra $15 if it went up $250. It just might be fun to see if I can do it.

Stock price isn’t the only consideration. Apple recently announced that they’ll be paying dividends to shareholders.

That’s good right? That would mean more people would want to buy stock in the company which would drive the price higher, right? Or does that mean the price will fall because they would have to use money to payout dividends instead of keeping the price up?

It’s neutral, really. Maybe good if it benefits your tax situation. On the positive side, it’s the mark of a steady-earning and cash-rich company. On the negative side, it’s also the mark of a company that’s pretty much fully grown and doesn’t have much growth left, hence why the company doesn’t need that money it pays in dividends to reinvest into growing the business. Generally, stocks like this that pay dividends are the ones you buy and hold for years, not expecting huge percentage gains in short periods of time.

By the way, no offense, but if you’re asking such basic questions, you should consider maybe sticking to index funds instead of buying individual stocks. (Specially ones at all time crazy highs.) It’s a jungle out there.

Just some points of fact: They paid out the first of these on Aug 16 at $2.65/share. The stock opened that week at $624 and closed the week at $648. And they still have nearly $100 billion in cash and investments.

In case it wasn’t obvious, the reason that growth is positive is because growth of a company is the main driver of growth in a stock price. Once growth slows or stops, so does the potential for hyperbolic gains in stock price.

Of course, along with growth potential comes risk potential. The key to investing is managing the risk/reward in a properly balanced portfolio. It’s tough for a rookie to do that alone by picking a limited amount of individual stocks.

Just to clarify a point: Motorola split into two companies and the Motorola Mobility part was soon bought by Google (apparently for its patents mostly). The other part is called Motorola Solutions and is independent of Google.

Google is rapidly downsizing Motorola Mobility. It will be laying off 4000 people in the first round.

As to Apple: It’s PE is currently ~15, which isn’t as high as I would have guessed it to be. For Apple, I wouldn’t worry about that number unless it got into the 20s. The other common issue is growth. Apple has had basically unsustainable growth in sales lately. There is also going to be increasing competition in the tablet market coming up that might force Apple to cut it’s prices to maintain market share. No one has a good enough crystal ball to see how that’s going to play out.

What Apple needs is a market that needs “the Apple touch” and it can move in and quickly dominate. Lots of stuff going on behind the scenes there. I think video delivery is the next big thing. They have Apply TV and such, but something better is needed from servers to software to content. WWSJD?

If they dominate something like that, then another round of huge growth will happen. Otherwise, it’s the same old, same old. Making money hand over fist which surprisingly doesn’t appeal to Wall Street which focuses on growth.

I’ve owned Apple stock since 2002ish. It had dropped from the upper 20s and brushing into 30s (in 2000, in equivalent to today post split numbers) to about 8 as everyone thought that Apple was had lost the battle to Intel and Microsoft. (For a nostalgia kick, here’s the day it lost half its value in 2000.) But my kids were loving those new iPods. It seemed to have formed a price base and had a loyal core of customers …

My mistake has been that as it kept hitting record highs and became “overweighted” in my portfolio I kept “rebalancing” out of AAPL into other stocks. How much higher could it go? Little did I know. If I had let it all ride my kids’ college expenses would not be worrying me. As it is it is still one my biggest positions even having sold off the vast majority of the shares I had originally bought along the way.

Have they peaked this time for real? Or will their long awaited but now getting closer more serious than the “AppleTV” foray into the television industry be yet another homerun?

I wouldn’t bet against them and am hesitant to take any more off the table. But no one knows.

There is, of course, a huge question mark about how they will fare in the future without Steve Jobs. This would be a very risky time to buy APPL. If you have money to risk, go ahead. Just don’t put all your apples in one basket. :wink:

“Buy low, sell high.” It’s pretty simple. Also, “you make money when you buy, not when you sell.”

A stock at an all-time high violates the first principle absolutely, and you’ll possibly lose your ass based on the second one.

And for what… a consumer electronics company who has a premium built in to the stock price because of the perception of Apple being “cool”? What’s the long-term outlook on that?

IMHO, as a long-term play, you can do far, far better than AAPL.

Which may be correct* … but which is also what people said when it hit 20, 50, 100, 200, 300, 400, 500 … Really. I’ve been in it that long. Same thing. At some point they may be right (the stopped clock is right twice a day) but they have not been so far.

*Except I think you make money when you sell, not when you buy …

You shouldn’t try to time the market per se and that’s advice I always give. I’m a long term buy and hold investor. However, you can’t totally ignore market timing. And because of that, I’d say the following about Apple:

  1. It is generally not the best move to buy when a stock is at or very near its 52-Week High. That doesn’t mean such an investment won’t pay off, it just means that most likely you can buy at slightly lower price in the near future just due to daily and weekly fluctuations.

  2. It is generally not the best move to start buying after a long stock runup. If you’ve been following the U.S. market you’ll be aware we’ve had a little mini-runup recently. It may last a few more weeks or it may end on Monday or Tuesday. The time to buy is when you have a few days of losses (market-wide) in a row, as even good stocks tend to go down when the overall market goes down. (This is in fact why value investing is so smart, many investors for various reasons sell off even good stocks in a day when say, the Dow loses even just 100-150 points, and that means good solid companies are suddenly available at a discount.)

  3. It is generally not the best move to buy based on solely the fact the company’s prior years stock performance was very good. You need to dig into the fundamentals and the market that the company operates in to know for yourself: is the stock still going up, or is it less likely? FWIW, Warren Buffet looked at Apple recently and said “I wouldn’t bet against them, but I’m not betting for them either.” That basically tells you very savvy investors are generally unsure right now what will happen with AAPL stock.

  4. In reference to your plan to buy before the iPhone 5 release and sell afterward, research the movement in Apple prices before and after previous releases. I have not done this, and do not plan to…but if you are planning to buy based on this you need to do that research. Let’s speculate each time the stock jumps around those release dates, see how much it jumps, and also see if the jump is more or less over time, or too random to say. (If the iPhone 3 had a huge jump on its release date, then each subsequent release was a little smaller, that might suggest the iPhone 5’s release won’t be as large as you’d like in terms of stock price.)

It’s not really akin to a “stopped clock” analogy. It is simply not possible for Apple’s growth to continue at the speed it has or its share price to continue growing at the speed it has. Unless you think it reasonable that some day Apple’s market capitalization may be 50% of U.S. GDP or higher. At some point the rate of growth is simply not sustainable.

At some point of course … the issue is whether or not they have hit that point. The “stopped clock” comment merely points out that at every point in the run up over the last ten years various pundits have said that Apple’s growth was unsustainable and that it was time to sell or even to short it. And then they created yet another new market.

Mind you I am holding it, not buying it … and I do not see it maintaining this absurd growth pace, just better than the market average … but the “too big” analysis has been bandied about for years … and it will at some point be true … but at a PE of 15 is historically low for this company … so this being the point seems premature yet again.

You made money on AAPL because you bought it at $20. Somebody buying @ 600 has no chance to make the sort of returns that you have made. None. The stock would have to go to $18,000… and that ain’t happening.

If you sell now, you’ve made money. If the stock collapses to 10% of its current value, you’ve made money. If it doubles, you’ve made money. But that’s only because you bought at $20.

And it’s rarely a mistake to rebalance your accounts. You sold high, which is what you’re supposed to do. What does it matter that you could have sold higher? That’s the way to get emotionally invested in your stock picks, which is never a good thing.

Maybe it’s just me and my bad math skillz, but all things being equal, one has a better chance of a $6 stock running up to $12 than a $600 stock running up to $1,200.

Yeah, but in regards to AAPL, 15X earnings is still too rich to pay for a consumer electronics company with a “cool” premium built into its stock and product prices. Hell, at least Microsoft had/has a monopoly on operating systems for Intel and AMD-based personal computers and a solidly embedded base of business software that will continue to pour cash into their coffers for years.

As I said already, AAPL’s earnings and stock price relies too heavily on being the coolest kid on the block.