I Bought Apple At $35: A Tale of Woe

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  ) .

The anti-Fool
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!

The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Microsoft, creating a bull call spread position in Apple, and creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Dan Radovsky owns none of the stocks mentioned and would rather not talk about it anymore. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (15)

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 June 01, 2011, at 11:11 AM, Athanassios wrote:

    Dear Dan;

    My story is slightly better than yours.

    I was a Dell boy had never touched an iMac in my life. Yet, I always admired the superiority of the company and the spiritual dedication of its followers.

    October 1996 I was in front of my PC and having thought "I don't regret this" I bought my 1600 shares of Apple at 25 (how come and you bought 35 a year earler???).

    Actually, there have been 2 splits since then (not one as you wrote) so my buying price in today's terms is 6,25.

    Yes, in 2000 we lost 2/3 of our investments in a single night but the disappointment of the early years had tought me much. Dell had climbed tenfold. Many times I lost my belief and thought that I was a real FOOL.

    Since 1996 I read and analyze Steve Inc every single day. I have reached a point where I can tell with mere certainty where it's heading.

    In 2005 I was FOOL enough and decided to get married and bite some profits from the big Apple. I sold 1600 shares at 58.

    Today I am still long with 1600 shares bought in 1996. Am I a FOOL? Hell no.

    According to my foolish analysis I will cash out in 5-7 years from now. I will give you a FOOLISH example.

    I write this message writing on a wireless keyboard, linked to a PC, linked to a 50 inch TV screen. Cook and the boys are losing time and waste my patience for an ALL-in-ONE cloud experience from my fireplace. They have "promised" this years ago but they are FOOLS enough to take things slow.

    I am way long on Apple. I wrote 2 years ago that they will be the first Terra stock (1trillion m.cap). Today some FOOLS talk about 2 Terra, even more.

    You have to be a real FOOL not to buy Apple these days....

    Another Fool for a Foolish country, Greece.

    Athanassios Kapralos, Athens GR

    www.athanassios.com.gr

  • Report this Comment On June 01, 2011, at 11:15 AM, imurphit wrote:

    I bought $400 shares in 1997 @ 16 1/32 (Cost $6,412.50 & $20 Comm)

    Now it is worth: 1600 Shares = $560,000.00

    87 Bagger, so far... I see Apple heading to $475.00 in 2012.

  • Report this Comment On June 01, 2011, at 11:50 AM, gfbjohn wrote:

    I had bought a boatload of Universal Display at $14 because LED technology will surely supplant CFL. It wandered to $12 and I bailed. I have watched with a black and blue backside believing it had crested as it kept climbing to over $50.

    Also had a boatload of Sirius when the short squeeze bear raid was going on and holding the price down in the 0.85 - 0.95 range. I figured it was a matter of time before the slingshot popped it up, even given the number of shares out there. Of course my entry point was the top of the range and it just never seemed to want to climb out so again I bailed at a loss. I kept expecting the bears to come back and shred SIRI again as it happily continue to bounce up over $2.

    *sighs*

    I did keep my head above water for the year, kindness of DAKT, which I was not in when mr. market decided LED billboards aren't going to sell anymore and clobbered the stock some 40%. Look at 'em today! Last laugh coming on strong.

  • Report this Comment On June 01, 2011, at 12:22 PM, demodave wrote:

    I bought my first AAPL shares in 2002 at an adjusted cost of about $9. After the 2:1 split in 2007, I sold half of it at about $85 (IIRC) and bought JNJ at roughly $67. That's basically right where JNJ is today. AAPL, of course, is now worth 4 times what it was when I sold it, but I was "being prudent" and "diversifying.... (I fugured that JNJ wouldbe a *good* investment, given all the Boomers out there.) I have also added AAPL since then, at higher costs that are currently in the money, but I could have saved myself some money by never having sold.

    So yeah, I have my own silly AAPL story.

  • Report this Comment On June 01, 2011, at 8:30 PM, lucasmonger wrote:

    I bought at $10 in 1998, sold at $30 just before the iMac introduction, then gritted my teeth during the dot com climb to $120. Still, I told myself that I can't complain about tripling my money.

    So when the dot bomb happened, I piled in at $13, held even through it's split and cling to $200 in dec 2007. Hindsight being 20/20 I should have sold, but didn't. Then cam the financial crisis which saw shares fall to mid $80s. So I bought more. Since them I've sold at $270, more at $310, and more at $345. Now I'm all out waiting to go all in if it ever tumbles dramatically.

    Sorry, not exactly a sob story, but amazing patience pays off. Folks need to stop thinking "day trader" and think "decade trader"

  • Report this Comment On June 01, 2011, at 8:35 PM, TMFHousel wrote:

    Nice article Dan!

  • Report this Comment On June 01, 2011, at 9:18 PM, XMFDRadovsky wrote:

    Well, guys, I am very happy that there were some of you that had the fortitude to stick with the company through its ups and downs and able to profit from it. I. Really. Am. Seriously ...

    I hope my next story can be "I Bought Apple At $350 and Lived Happily Ever After On My Yacht Off The Coast of Monte Carlo!" On second thought, think of all the taxes.

    Best,

    Dan

  • Report this Comment On June 01, 2011, at 9:25 PM, XMFDRadovsky wrote:

    And thank you, Morgan.

  • Report this Comment On June 01, 2011, at 10:33 PM, demodave wrote:

    Dan,

    As an amateur Fool, I must remind you that tax avoidance is never a good reason to make an investing decision. If you buy and hold long enough to qualify for long-term gains, you've already done your job. :)

    dd

  • Report this Comment On April 19, 2012, at 6:07 PM, buyer157 wrote:

    Having traded stocks off and on for 20+ years, I thought I'd contribute my tale of "Apple Woe". I'm sure there are thousands of stories like mine--but this is mine and it haunts me every time I see the ticker and AAPL. Around 1998, after making some decent, profitable trades with Yahoo, Cisco, Microsoft, Walmart, etc., I was convinced that APPLE was THE STOCK FOR THE FUTURE. After all, I was a professional graphic artist and knew Macs well. I knew the company was destined to roll out the coolest, most innovative tech-gadgets imaginable. So, I bought 5000 shares at $13.00. I believe Bill Gates bought a million shares around that time also. That should have been proof enough it was a no-brainer. But for some reason I still cannot rationalize, I got the jitters one day (Rumors of Jobs leaving the company, other companies selling clones of the Mac, whatever), and sold the whole lot for perhaps a $10,000 gain. Of course, the iPod, iPhone, iPad, etc burst upon the world in years to come, and I always thought there might be a large enough pullback to entice me back in. I just never did. I believe there have been 2 stock splits since then, so the current stock price of around $600 doesn't really paint what a tragic move I made. I'm now a school teacher, happy with my life, but still get a little misty when I do the quick math and realize what a multi-millionaire I "could" be right now, had I just stuck with a company I knew and loved.

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