Apple Inc. (AAPL) has fallen out of favor with several investors lately, and certainly for not the first time in it’s nearly four-decade history. I’m not an advocate of selling any stock without good reason, and I rarely do any more. In my case, I found a few reasons a couple of weeks ago to sell my stake in this company. I’m not making a sell recommendation, but simply sharing one investor’s opinion about why I sold.
Sometimes it’s good to act on a hunch, and not so good to put it off. Last summer at one point, I found myself thinking about some of my less stellar investments. At the time, I had taken a small loss with Apple and wasn’t really more excited or impressed about the company’s prospects than I had been when the Apple Watch had been announced.
But then the release of the iPhone 6 models happened in the autumn and the stock surged and I was seduced into forgetting the nagging doubts I had about the future of Apple’s innovation and growth. Doubts about seeing another “Golden Egg” that had been laid every few years by Steve Jobs but which hadn’t occurred following his death in 2011, four years prior.
I need to back up a bit here. I have been one of the Apple faithful – well, in terms of product usage – since 2005. I can only wish that I had been an investor back then and also bought some Apple stock. I love their products and I would find it incredibly difficult to get out of the Apple ecosystem.
In early 2014, I decided to finally buy some Apple stock for no other reason than my great familiarity with the company and loyalty to its products. I wasn’t expecting the very nice surge in stock price that followed, but that served to justify my decision for a time.
Then I began to wonder about what had been nagging all Apple followers for a while, the faithful and the non: what’s next? Again, I was not gushing over the Apple Watch after it was first announced, and I was entirely put off by the exorbitant pricing of that entire product line after it was finally released. I reasoned that if I was ever to spend that much money on a watch, on an accessory that has drastically fallen out of favor in the past decade, then I would go to a quality jeweller and buy something that would last me many years instead of becoming nearly obsolete within three years.
I also began to reflect upon what I had thought seriously about following Steve Jobs’ death in October 2011. I was very introspective during that time, reflecting on that one man’s influence on not only technology but literally the world. His vision. His passion. His enthusiasm. Love him or hate him, there are few people then and now who can deny his mark on the world.
The one conclusion I drew was that Apple was Steve Jobs and Steve Jobs was Apple. The two were inextricably linked. Thus the death of Steve Jobs, I reasoned, would eventually lead to the slow death of Apple itself. I remember visiting the local Apple Store shortly afterward, the crowds still gathering as they had before, but this time with a sense of sentimentality. Even a few months later there was still a nostalgic effect going on, some people buying Apple products because of what they and Steve Jobs meant to them if for no other reason.
Then, as I suspected, Apple stock took a dip and bottomed-out in early 2013. Aha, I thought, the world waking up to the reality of Steve Jobs and Apple being inextricably linked! But then the stock did what I did not expect and began to surge for two years before peaking in mid-2015. Again, I finally bought in early 2014 and rode some of that wave to the top. Like others, I was beginning to think that perhaps the new Apple, the post-Jobs Tim-Cook Apple, was going to be just fine and emerge even stronger than the old Apple.
There was the never-ending talk and rumors about the next Golden Egg, the “next big thing” from Apple. The stock ebbed and flowed, but still climbed, on rumors about that next big thing.
And then the Apple Watch was announced.
I, like most other Apple followers, scratched my head at how Apple could try to justify the cost of something far less practical than a smartphone or tablet yet, in some cases (depending upon watch choice and strap design), far more costly.
This was the Golden Egg that everybody post-Jobs had been waiting for. Yet it was not what this Apple aficionado and investor had been looking for, and I know that I speak for millions of others.
Then came Apple’s recent quarterly report in late April 2016. Would it bring more bad news about dwindling iPhone sales as other recent quarters had? What about the 2016 outlook? By the way, any new, dynamic products being planned?
Yes, not so good, and no were the answers I saw.
So then I felt as though I had a decision to make. Three years ago, I vowed to be a long-term investor. Was I going to ‘keep the faith’ in Apple or was it time to be realistic and consider other options?
I’ve learned, and realized the hard way, that unless a company’s thesis or outlook takes a drastic turn for the worse, you buy shares in a company and hold on for the long haul, through all the ups and downs. As long as that company is innovating and pushing ahead and generating new sales, preferably also in new markets, you hold on even if they’re running a debt and even if the market gives it a beating.
But what I’ve come to realize is that the new Apple is not the old Apple. It is no longer innovating and pushing ahead, it’s tweaking. Almost as a sign of desperation, it is trying to generate new sales by wooing lower-income customers with cheaper offerings. It certainly has not had debt for a long time. In fact, it generates more free cash in one quarter than many companies earn over many years.
The question, however, is not Apple’s profitability but its prospects. It’s about momentum. Again, what’s next? Something incredibly amazing in the works, or simply fine-tuning and upgrading products and ideas that were born in the mind of Steve Jobs and not anybody currently working at Apple?
I no longer see a leader but a follower. There is talk of Apple working on an electric car. Um, sorry guys, but that’s not a new idea and Tesla is already leaps and bounds ahead of you. Oh, there’s also now a bigger iPad despite declining iPad sales over the past nine quarters. And Apple Pay.
Somebody pour cold water over me to contain my excitement.
You see, Apple has attracted people because it has been a momentum company. People – product users and investors – have invested in Apple because of where it might take them, not where it might keep them.
And this is why I’ve dumped my Apple Inc. stock. I should have acted upon my original hunch last summer, at a much higher stock price, but getting out now is better than later. The iPhone drives a majority of Apple’s profits, but its sales are stagnating and no current – nor near-future – Apple product has any chance of picking up the slack.
Because I can’t see anything exciting, I’m out. I don’t want the quarterly dividend. I don’t want a tweak here and there to the same old product. I want something exciting to look forward to, what I used to look forward to every time Steve Jobs took the stage.
But now he’s gone and so is the innovation and excitement that was once Apple. Apple’s very soul is gone and struggling to find a new identity. I see now more than ever that Apple was Steve Jobs and Steve Jobs was Apple.
Could Apple re-invent itself? Yes, but we’ve only seen it done to a large degree of magnitude under Steve Jobs, and this was on the back of new, revolutionary products. For this to happen under Tim Cook or somebody else is entirely possible, but for this investor I concluded two weeks ago that it is no longer probable, at least for the foreseeable future. For now, I’m putting my growth money in something else.