Back in the day, I used to discuss investing and my portfolio here at OD…B. But the last 10 years have been uninteresting with an unrelenting bull market recovering from the disaster of the 2008 financial crisis up through the 2016-2018 “Trump Trade”. I believe that the run is coming to an end as the globalized economy splinters and Nationalism rises in the world.
Back in 2004, in the aftermath of the 2000 DotCom crash, I bought Apple stock. I had sworn never to invest in that failed company again, but with the success of the iPod with those white earbuds combined with the new iTunes Music Store, I bought into Steve Job’s vision of the Mac as a Digital Hub. In the end it was the iPhone that drove Apple valuation to it’s current stratospheric heights as the largest company by market cap.
Over the last few years, I began valuing Apple as a typical blue chip, based on its dividend payments. Apple became a huge company that was going to be judged on growing earnings and paying out a portion of the profits to investors. Apple’s been paying a dividend for about 5 years now. Initially yielding 2.5%. It’s been in a general range of 2 to 1.5%, but reached as low as 1.2% a few months ago as the market peaked. I looked at that and took it as a clue that the stock was overvalued.
Now this is combination with the original investment thesis I had in Apple, as the center of the home computing ecosystem. And the iPhone/iPad/Mac combo has done just that for me over the years. That iPhone camera connected to social media has killed both the camera industry and professional photography. The Apple Watch has decimated the mid price quartz watch market. But at this point, I don’t see the growth driver. I think the iPhone X is a nice iteration, but I see lots of older phones out there and a sentiment that some of this technology is just unnecessary. There’s a reaction against social media and connectedness.
And Apple has not introduced a new category killer since the Watch. The AirPods are a nice accessory and I seem them everywhere now. The HomePod and AppleTV haven’t gained real dominance because the streaming services and cable companies can’t be displaced by hardware.
Worse, Apples strategy of pushing prices up is now seeing consumer resistance. And if economic times turn tougher, it will be a completely untenable strategy. For years we’ve had stable prices for electronics with gradual improvement that made upgrading worth it from time to time.
So, I believe Apple’s stock price will fall back to where the dividend yield supports the value, back to yielding in the the 2 to 2.5% range. Then I’ll be a buyer as long as the company remains strong and the product lineup attractive.
