A Special Kind of Idiot

It takes a special kind of idiot…

Since September of 2012, Apple stock has been on a major slide from a top of seven hundred per share level all the way down to three hundred and eighty at its lowest in April of this year. All along 2013 there was no shortage of Apple stock haters. After Steve Job's death Wall Street declared the company stock dead. Traders and hedge funds sold it while they grabbed for frothy companies that in reality don’t measure up Apple’s proverbial toe. They spoke volumes with their asset allocation away from quality to froth. However, since the three eight lows, appetite for the stock has been on the rise. Apple is making a rounding bottom from which it can build a comeback of sorts.

Similarly to Apple, Facebook fell out of heaven immediately after its initial public offering. The open stock price high was forty five dollar per share then quickly tumbled to a low of seventeen. Then just like Apple, Facebook has been working on a rounding bottom from which it mounted an impressive comeback to regain and breach its IPO price.

This article is not meant to be a lesson in Stock price history for two major corporations. The point here is to highlight how market sentiment often prevents investors from seeing the obvious. There is no doubt of a few facts that guaranty Apple a rosy future for the foreseeable future. Traders got hung up on ‘deteriorating margins’ and ‘lack of innovation’ and declared it a broken company. Incidentally, Apple’s 38% gross margin is the envy of most corporations. Instead of moping over how margins are eroding and how they need Apple to show them innovation, traders should have paid attention to Apple’s core assets – pun intended. If you peel away the Apple name and consider this ‘xyz’ company’s strengths:

• It has a cult-like clientele
• It sells out of every new widget it makes in minutes
• People camp out to buy the new widgets when don’t really need to
• It pays a giant Dividend and buys back stock
• It controls almost half the music sales on the planet
• It has a humble price to earnings ratio of about 13 (amazon 1278; nflx 267; goog 29; GE 18)
• Oh and by the way it has 140 billion Dollars in cash

A company with the aforementioned prospects is as sure an investment as any available. If traders are not comfortable risking money on such credentials then they should stash their money under the mattress.

… It takes a special kind of idiot to undo the money making machine that Steve Jobs built. Although consensus is that Tim Cook, Apple’s current leader, is not Jobs, he certainly is not an idiot. After all he was hand picket by the Genius Jobs to take over his baby. Give them time and the markets may yet get that flying car they desire.

Similarly, markets chose to concentrate on Facebook’s bad IPO and broken stock instead of looking at what’s inside company pages. The street is not littered with dead companies that had a billion users. Although the list of assets is not as impress Apple’s, Facebook has what no other company has: the attention of a billion users every day! And just for that it is very hard to argue that the company is doing wrongs.

… It takes a special kind of idiot to mess up the potential of a billion users. Although it is debatable if Mark Zukerberg is a true genius or opportunistic, either case, he is not an idiot of the special kind.

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