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7am Saturday

October 19, 2019

Good morning! Grab your cup of coffee and enjoy this week’s dose of 7am Saturday. Today, we will look at the amazing story of Apple and see why shareholders should be smiling this weekend…

Investing Isn’t Always Easy, But It Is Rewarding

💪 Apple is back on top, overtaking Microsoft this week to reclaim its status as the world’s largest company by market capitalization.

Charlie Bilello posted this table on Twitter showing the 10 largest companies in the world for each decade going back to 1980:

I find this fascinating! Look at how the world economy has changed from being driven by mostly energy companies in 1980 to today where we see a lot of companies that are in the technology sector. And if they aren’t tech companies, several are companies that have utilized the power of technology to to differentiate their business. Innovation is winning! Also notice that there are no energy companies in the top 10 today.

Speaking of technology and energy stocks, take a look at the S&P 500 sectors and their performance (as of 10/11/19) since the October 2007 peak before the Great Recession of 2008-2009. Energy stocks have went nowhere while tech stocks have been the #1 sector:

🍎 So, now that Apple is the world’s largest company, let’s take a look at how it got here. Apple went public in 1980. The stock price is up over 45,000% since the IPO:

Apple Stock Price Since IPO (excludes dividends!)

📈 Apple (AAPL) hit an all time high yesterday crossing $236 / share. AAPL’s prior all-time-high was on 10/3/18, or just over a year ago. Check out this chart of AAPL:

📉 The stock dropped over 38% from 10/3/18 to 1/3/19. Now the stock is up 66% from the January 3rd low! This is what makes investing hard for a lot of people. When you follow a stock like Apple on a day-to-day or month-to-month basis you will experience some wild swings in price. In order to participate in the big gains like Apple has had, you also have to be willing to go through some significant downturns. Many don’t have the stomach for this and they sell exactly at the wrong times. This chart explains why:

📱 Take a look at how AAPL has performed since 2007, the year they announced and launched the first iPhone. The stock price has went from just under $12 to over $236 (up over 1,800%). But, the only way to get the 1,800% return was to have been invested for the entire time. Or, you could be a really good market timer (next to impossible).

Take a look at this chart created by our firm’s talented Research Analyst, Austin Wilson. The blue mountain graph is AAPL’s stock price since 1/1/2007. The gray line is showing you the magnitude of each drawdown in the stockprice. There were five significant (often multi-year) periods where APPL stock had a drawdown greater than 30%:

Apple: Historical Drawdowns (%) since 1/1/2007

🔮 We all want to own the next Apple. How many people had the foresight to buy Apple in 2007? But, not only did you have to buy AAPL in 2007…you had to hold it through each of these drawdowns. During these drawdowns the common emotion is fear. Fear that it will get worse, and fear that AAPL will never recover. Fear leads to the temptation to throw in the towell and sell your AAPL stock.

📜 Stay focused on fundamentals – Since 2007, Apple has been leading the way in changing the way we live, work, and play with the iPhone and iPad. These two devices have had profound effects on our lives. When a company innovates and makes great products, revenue and earnings follow. In 2007, Apple had $25 billion in revenue and $3.5 billion in net income. This year, Apple is expected to do $259 billion in revenue and $53 billion in net income. This is why the company has seen such a big rise in the stock price.

❗ But remember, past performance is not a guarantee of future success. Do your homework before investing in Apple. As with the world’s largest companies of decades past, it’s very unlikely that Apple will remain #1 forever.

The Good Stuff

🐦 Tweet of the week:

🏃🏿 #NoHumanIsLimited – Last weekend, Eliud Kipchoge became the first person ever to run a marathon in less than two hours. With a time of 1:59:40 history was made. Many thought it was impossible to run a marathon that fast. Just add it to the list of what was once thought to be impossible by humans:

  • 1954: Roger Bannister breaks the 4-minute mile
  • 1969: Neil Armstrong walks on the moon
  • 2009: Usain Bolt runs 100m in 09.58
  • 2019: Eliud Kipchoge runs a sub two-hour marathon

Really Good Question (RGC) of the week – What is something that people greatly underestimate? 

My answer: The future impact autonomous cars and trucks will have to our economy and lifestyles. The impact could have a lot of similarities to the way mobile devices and mobile internet connectivity have impacted our lives. More on this in a future email.

I’d love to hear your response to this week’s question. If you feel like sharing then simply hit reply.

🏐 Volleyball update – Tournaments have started for Liberty-Benton High School (my daughter, Avery’s volleyball team). They won the first two games of the tournament bringing this season’s record to 22-2. We have another game this evening and then on to District’s next week.

🏈 Buckeye fans: Last week I mentioned that OSU was playing Wisconsin this week. Yikes! Looks like I got ahead of myself. I forgot about last night’s Friday night game against Northwestern. Don’t they know that Friday night football is for high school teams?! It looks like next week’s game against the Badgers is shaping up to be the game of the year so far in college football. Can’t wait!

Make it a great day,


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