Friday, April 23, 2010

Seven Reasons Apple Shareholders Should Be Cautious - WSJ.com


If you had asked me a couple of days ago, I would have told you that I wasn't too worried about Apple stock (ticker: AAPL).

But then I had a visit yesterday from one of the salespeople I work with. This fellow doesn't lack for confidence, shall we say, and always is regaling listeners with stories of how he cleverly performed some task, or closed a deal with a reluctant prospect.

Anyway, he told me proudly that he had bought Apple a year ago, when the stock was selling at $90 per share (it closed last night at $266). He went on to describe how clever he had been in some of his other purchases, with slight digs to investors like me who prefer a "margin of safety" in my investments.

After having done this job for many years, I have observed many times how investors tend to only talk about their "winners", never their losers. This was particularly true in the glory years of the "Dot.com" stocks, when obscure companies with no profits or revenues soared to unimaginable heights (only to crash in the subsequent years).

Put another (less kind) way: my salesperson friend may be good at doing deals, but past history would suggest he's not so good at investments.

Anytime a stock (or any other investment) is universally liked, it is worth asking just how much "good news" is already reflected in the market price.

And when you see investors bragging that their insights (usually based on some anecdotal tipbit, like loving your iPhone or iPod), it usually time to start heading for the exits. And I am thinking that maybe I am too complacent about my Apple holdings these days.

Everyone, it seems, loves Apple these days, as this piece from this morning's Wall Street Journal points out.


Seven Reasons Apple Shareholders Should Be Cautious - WSJ.com