Why Apple is a Good Lesson on Investing
Over the last few years some elements of the stock market have seemed fairly crazy. Tech stocks, often belonging to social networking sites like Twitter, have had an unbelievable run. Meanwhile Apple Computers (a favourite of mine) have frequently been heavily criticized for declining revenue growth and slowing sales numbers. Business commentators like to point to the growth in Google’s Android phone platform and its large share of the mobile phone market as proof that Apple’s days as a global leader are past.
However with Apple’s most recent earnings report out there are some important things to take note of. The chief reason that we invest in companies is because they make money, and Apple is currently one of the most profitable companies around. How profitable? Take these statistics published today in Slate.com.
If Apple’s iPhone was it’s own company it would be larger than 474 companies on the S&P 500 index and would have revenues in excess of Amazon, Coca-Cola, McDonalds, Google and E-bay. That’s just its phone division. The iPad, whose sales numbers are definitely plateauing if not declining is still a valuable business netting $5.9 billion in revenues, greater than Facebook, Twitter, Yahoo, Groupon, and Tesla combined. Mac Computers, which earned less than the iPad division, still garnered an impressive $5.5 billion. Even the iPod, now almost totally forgotten in the midst of smartphones and iPads still earned an impressive $442 million, 77% than Twitter’s $250 million in quarterly revenues.
Apple’s stock has periodically taken a licking, but has been beating its way back to its previous high (partly due to a recent stock split and dividends periodically being paid), but its story is an important cautionary tale.
Good investing comes from choosing companies that produce revenue and retain growth potential, in other words focusing on the fundamentals of investing. Despite naysayers, that’s exactly the kind of company Apple has been. So why does Apple get so much negative attention? Because predicting the fall of a Goliath is exactly the kind of thing that makes news. Whether it’s true or not is irrelevant in the news cycle, but it is a source of bad investor advice, and should serve as a cautionary tale to investors considering taking financial advice from business news.