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The year was 1995, and even though I thought that buying a Macintosh computer was too expensive compared to a PC running Microsoft (Nasdaq: MSFT ) Windows, Apple (Nasdaq: AAPL ) stock was affordable. So I bought some. The price: $35 and change.
For every iPad, a Newton
This was two years before Steve Jobs' return to the company from which he was ousted in 1985. And it was well before the iMac, iTunes, iPod, iPhone, and iPad became synonymous with must-have consumer technology. Instead, Apple was trying to sell the Newton, its version of a personal digital assistant. This precursor to the iPad arrived before the party started, and it was not welcomed.
Furthermore, Apple's less than Jobs-like leadership during The Steve's absence made two serious mistakes. First, it had utterly confused consumers by rolling out a tangle of different product lines. There was the Quadra, its professional line; the LC, its educational line; and the Performa, Apple's commodity computer, which it marketed through big-box outlets such as Price Club (now Costco) and Wal-Mart. The Performa in particular, with 74 different models, had potential customers' heads spinning.
Second, it licensed the Mac OS to other manufacturers, such as Power Computing and Radius, who then sold Mac clones that were often more powerful and significantly cheaper than Apple's own. Why, then, would you buy the real thing? I don't know, either. Buying a cheaper clone might have seemed like a good decision to me as a consumer, but it was extremely damaging to the premium perception that Apple had managed to cultivate for its products.
I am an iMoron
Meanwhile, back at the ranch, my Apple stock did a quick climb to almost 50, then a tortured fall to 1/3 of my original price. I lost the faith and wanted out ... but without a loss. So, when in July 1998 it finally climbed out of the hole to 36, I sold.
Yes, buying Apple at $35 was a really smart and prescient move ... and, yes, selling it three years later at nearly the same price turned out to be a really dumb and shortsighted one. Actually, really, really shortsighted, because (sigh) this was just before two 2:1 splits that would have turned my original investment into a 40-bagger.
As the world now knows, just about everything Steve Jobs and Apple now touches turns to gold. But back in the day, I wasn't the only one who had doubts about the company. These excerpts from The Fool's archives give a taste of the then feeling about Apple:
- "Apple has been a stunning disappointment to investors over the last decade, with management providing literally textbook examples of how not to run a business."
- "Being a bear on Apple is almost a cliche these days."
Even James Surowiecki, now of The New Yorker, then of the Fool, lamented shortly after Jobs' return that the prodigal leader had not shown that he could turn Apple into an efficient production force similar to Dell (Nasdaq: DELL ) .
So what have I learned from this exercise in "what if?" For one thing, I didn't follow a basic Fool rule: Don't buy the product, buy the company. I bought Apple stock because I was a fan of the Macintosh computer, but I hadn't done my homework in terms of the company itself. Perhaps if I had, I would have seen how tightly Steve Jobs' DNA was intertwined with Apple's, and hopefully would have had more faith in his ability to take the company up the mountain once again.
As I mentioned above, I sold my Apple stock in July 1998. This was only one month before Steve Jobs pulled back the curtain and revealed his marketing genius once again. On Aug. 15, 1998, Jobs unveiled the very first iMac. You do remember those cute little Bondi blue all-in-one plastic pods, don't you? If I had waited one more month, I could have seen Apple reveal its reinvention.
I don't say that because I fell in love with the iMac as a product, but rather for the reasons mentioned above. The iMac was the first product to show that the company had found its competitive footing again, and early proof that Apple would return to its roots of unique and differentiated design, restoring its brand's premium appeal.
It's never fun seeing a potential 40-bagger sold on a silly premise like "breaking even." But it'd be even more of a shame not to reflect on some of your past investing mistakes, and thus learn how to be a better investor going forward.
Do you have any boneheaded stock-selling experiences? Be sure to discuss in the comment box below!