Why I Just Bought Apple

I claimed, I saw, I bought. Apple (Nasdaq: AAPL  ) now has a home in my portfolio. The details:

  • All of my purchases -- both stock and options -- were made on Oct. 17.
  • My stock buy-in price is $98.83 per share.
  • My options are LEAPs, mature in 2011, and feature an $85 per share strike price.

Most of you -- especially those of you who are traders -- will smile in seeing those numbers; I've already realized a decent gain as of yesterday's close. But with Mr. Market's mercurial behavior, those gains could disappear in seconds.

Why I'm in for the long haul
Let him be, I say. My faith in Apple is cemented from years as a customer. But also because of two very interesting conversations I had during our recent Rule Breakers team trip to Silicon Valley.

The first was with Bill Gurley of Benchmark Capital. He also owns Apple shares. OK, maybe a few more than I do. Fine, a lot more than I do. He's still bullish, and that's what matters: "The majority of entrepreneurs who present to us are using Macs, and these are the influencers," Gurley says.

I've noticed something similar. People I never thought would try a Mac are now trying one. Sure, some of these customers will switch back to Windows. But others won't. Vista's problems -- real or imagined -- have opened a window that Justin "I'm a Mac" Long has climbed through. He's there in the living room, parked in the easy chair, sipping a latte, and generally wondering what you'd like your Mac to do next.

The other conversation was with one of my rebellious teammates, Karl Thiel, during our drive from San Francisco to the airport. As he sees it -- and I'd have to agree -- his $700 Vista laptop is roughly equivalent to a $1,200 MacBook. Why the premium? Is it really worth it?

Yes ... and no
There is no easy answer to that question, even though Harry McCracken at Technologizer has made an excellent attempt at providing one. His conclusion:

The MacBook is close in price to the laptops I looked at which it resembles most closely, all of which target what I think of as the low end of the high end of the notebook market; if there's a Mac Tax here, it's not worth worrying about. That said, it's possible to get a somewhat more utilitarian 13-inch notebook -- one that's better-equipped than the MacBook in some respects, even -- for a lot less.

Hence Karl's point. Consumers are consumed with fear. Cats and mice could begin cohabitating any day now. Why invest in Apple if there's a price premium to what Dell (Nasdaq: DELL  ) , Hewlett-Packard (NYSE: HPQ  ) , and Lenovo are offering?

My answer is simple: Because there is no Mac Tax.

Three reasons why you'll buy Apple, too
Put down the keyboard, grasshopper. I'm not denying the existence of a price premium. Macs do cost more. But what does that premium buy you? Three things, principally:

  1. Choice. Justin Long can disguise himself as John "I'm a PC" Hodgman, but the reverse? Yeah, that might not work out so well. Remember: Macs can be PCs but PCs can't be made into Macs. Not easily, at least. The good news? A new Dell notebook can be made to run Windows XP, or Red Hat's version of Linux.
  2. Leopard. Whereas Vista has unleashed the Microsoft (Nasdaq: MSFT  ) haters, Leopard, the latest version of the Mac operating system, has won admirers. And for good reason. Advanced features like Spaces allow me to run Windows on one screen and my Mac on another. I only see the view I want to see, when I want to see it. Thumbs up on productivity.
  3. Geniuses. If the Mac OS is the root of Apple's competitive advantage then its network of retail stores is the trunk. Forget about the iGear being sold through Best Buy (NYSE: BBY  ) . I'm talking about the 247 Apple-owned-and-operated retail locations that, by my math, produced roughly $1,000 in sales per square foot last quarter.

And one more big reason ...
Stores are also home to Apple's Geniuses, problem-solvers who'll tackle anything that has an Apple logo on it, often for free, while you wait. Think of it as the Nordstrom touch for the savvy computer shopper. Neither Dell nor HP can match that level of service, nor would they want to, given what they're selling PCs for.

And that really is the point. Apple faces low-cost rivals in every market -- Dell in PCs, Amazon (Nasdaq: AMZN  ) in music and video, Motorola (NYSE: MOT  ) and High Tech Computer in smartphones. CEO Steve Jobs and his team are doing exactly what they must: They're creating better, more integrated experiences and showing them off in these hugely profitable display cases that we call Apple retail stores.

Welcome home to my portfolio, Apple.

Fool contributor Tim Beyers recently returned from a tour of Silicon Valley with his Rule Breakers teammates, during which they visited more than a dozen established and emerging innovators. Care to learn more? Just tell us where to send you our updates. It's 100% free.

Tim had positions in Apple shares and LEAP options at the time of publication. Amazon, Apple, and Best Buy are Stock Advisor selections. Best Buy, Dell, and Microsoft are Inside Value picks.

The Motley Fool owns shares of Best Buy. Its disclosure policy still recommends an apple a day.


Read/Post Comments (4) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 30, 2008, at 6:09 PM, ranchrfl wrote:

    Right On!

    This week I had to format an external drive on a PC Right Click this, that and over there upper right you get the point on a Mac you go to the application Disk Utility highlight the disk you want and click erase.

    It's the difference between a power boat and a sail boat, sailing is great if you have the time. I live in Sarasota, Fl and if I want to go to lunch in Tampa I push the button an go and I don't have to tack across the Gulf Of Mexico to get there. I also get there today not next week!

  • Report this Comment On October 30, 2008, at 11:32 PM, nixtr wrote:

    Anyone who has to deliberate whether 750 to 1200 is worth it for a computer that works versus a computer that quits several times a week is not one upon which it is worth wasting thought.

    Send that pound foolish individual to a distant place.

  • Report this Comment On October 31, 2008, at 4:05 AM, Dart65GTConv wrote:

    Agree, just purchased 17" macbook (my first Mac) handing down my Hp's to my kids. These were workable quality units I thought that for a few hun less had to be worth it. Wrong, this macbook is the Macdaddy no comparison not even close. Don't forget tax # 4 spy ware and anti virus. and if time is money the screens are up as the enter key returns to ready position. Not kidding blood pressure must be down 20 points. Picked up nice chunk of AApl at $97 and now am convinced this is a supreme long investment. On more thing my children and their friends do not consider anything other, branded deep is Apple and for good reason.

  • Report this Comment On March 27, 2009, at 9:05 PM, raquet220 wrote:

    I am apple certified and would be glad to anwser any questions any of you may have as the need arises. I have a blogg on PC vs MAC I would be more than happy to open up some general Mac specific support. Stop by and let me know what you think.

    http://applebattle.blogspot.com/

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