Why I Don't Own Apple

I don't own Apple (Nasdaq: AAPL  ) stock, and I probably never will.

I don't really like to speak in absolutes, especially when it comes to investing. After all, the best investors aren't those who take a position and doggedly stick to it. The best investors are intellectually agile and are willing to change their position when it's right to do so.

But I still doubt I'll ever own Apple.

Last weekend, The New York Times' Joe Nocera had some stinging jabs for Apple in the wake of the iPhone 5 release, and some of the glitches that have riled up customers. A key aspect of why Nocera thinks the company may have lost a step has to do with the loss of its CEO. He writes:

Part of the reason is obvious: Jobs isn't there anymore. It is rare that a company is so completely an extension of one man's brain as Apple was an extension of Jobs. While he was alive, that was strength; now it's a weakness.

Steve Jobs: No ham sandwich
Warren Buffett has said that Coca-Cola (NYSE: KO  ) could be run by a ham sandwich. That's an exaggeration, but not by much. From year to year, the core products that constitute the Coca-Cola empire don't need to be changed in order for customers to buy them over, and over, and over again.

Apple is in a much different position. Even more so than technology, Apple sells cool. Apple sells wow. Apple sells OMG. As Buffett would attest to -- and he has many times -- investing in technology is difficult. Investing in cool is even harder.

Steve Jobs seemed to be one of those rare minds who were able to combine execution with awesome in a way that connected perfectly with his customers. And, in the business of selling cool, you need that, because this is a homerun business -- there's no room for singles or doubles. With Jobs at the helm, Apple hit a bunch of monster homeruns. Even if he were still leading the company, that would be a tough performance to keep up. Without him, the odds get much longer.

Beyond cool
Reading Apple its last rites after a few relatively minor snafus is no doubt premature. Indeed, as my fellow Fool Jeremy Bowman pointed out yesterday, despite the jeers from Nocera and others, Apple appears to be doing just fine. But, while Apple may not actually be stumbling now, its continued success will still depend on hanging onto that fickle, ridiculously demanding crown of cool.

Let's say that you're on the same page as I am -- you admire the tremendous success that the company has had, you think it churns out some very cool products but, from an investment perspective, you're concerned about the challenge the company faces in continuing to stay ahead of the pack. Where, then, can we look for companies with less of that similar risk -- that is, companies that Warren Buffett would agree could be run by a ham sandwich?

Coca-Cola is obviously on the list, and I'd argue that PepsiCo (NYSE: PEP  ) , which complements its beverages with one of the world's largest snack-food businesses, joins it. McDonald's (NYSE: MCD  ) is among this group, as well -- its patronized precisely because customers know that they can go into a location today and get a double-cheeseburger meal, and go in a year from now and get that same (tasty!) meal then. Finally, we can readily admit that Wal-Mart (NYSE: WMT  ) sells anything but cool. Wal-Mart retains its customers based on low prices, and its massive size gives it considerable might in being able to keep those prices low.

There are certainly risks associated with these companies, as well but, unlike Apple, investors don't have to count on a new "wow" product, or innovation out of these companies year after year in order for them to continue to be worthy investments.

The Apple of your eye
The investments that make it into any given investor's portfolio depend a lot on risk tolerance and what they're investing for. A conservative investor who's saving primarily for retirement -- like me -- may be turned off by what I've laid out about Apple above. A more risk-tolerant investor, on the other hand, may be willing to take on the innovation risk at Apple. And, of course, there's the possibility that you simply don't agree with my take on Apple.

No matter what the case, if Apple is on your radar or in your portfolio, you'll definitely want to check out the special report on Apple from Fool tech expert Eric Bleeker. This report outlines the opportunities as well as the risks for the company, and gives you three areas you must watch. Click here now to check out this report..

The Motley Fool owns shares of McDonald's, PepsiCo, Apple, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of McDonald's, Apple, PepsiCo, and Coca-Cola. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Matt Koppenheffer owns shares of McDonalds, PepsiCo, and Wal-Mart, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye


Read/Post Comments (22) | Recommend This Article (22)

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 September 27, 2012, at 7:20 PM, bertobob wrote:

    It appears that you did not invest in Apple when Steve Jobs was alive. So I guess if you missed that boat, why would you invest in it now??? No one really cares. Your whole article sounds like a load of sour grapes.

  • Report this Comment On September 27, 2012, at 7:22 PM, chev454rat wrote:

    Back in the 90's I bought my Apple stock at 20 per. My adviser at that time told me I was nuts and throwing my money away. The company was a loser soon to be gone. I should only invest in mutual funds and safe companies (i.e. KO which was 31 per then - 38 now). I will stand by my choice and looking at the valuations continue to invest in Apple, yes even without Jobs. They will be just fine. If not, there is a hell of a lot of free falling to do before it ever hurts me. Therefore I totally disagree with this whole article and its premise.

  • Report this Comment On September 27, 2012, at 8:05 PM, EVplusEV wrote:

    These types of articles ignore Apple's superior echo-system which keeps customers buying Apple products regardless of the subjective "cool" factor. Will this last forever, probably not but that's why you monitor the companies you own. As to risk, Apple has a superb balance sheet, is cheap relative to the S&P, and continues to execute. It has been more risky to your retirement nest egg to ignore Apple as an investment (especially over the last several years).

  • Report this Comment On September 27, 2012, at 8:18 PM, shard61315 wrote:

    Perhaps the biggest piece of tripe I've ever read on the subject of investing.

    Apple's success revolves around cool? Really? Nothing to do with an out-of-the box functionality that makes any product intuitively and instantly useful to Everyman customers? Nothing to do with unparalleled customer service? Masterful supply chain command?

    SJ may have crystallized all the corporate elements that resulted in Apple being many different things, "cool" being a small part of it. Coca-Cola thrived after taking the cocaine out of the recipe; Apple will continue to thrive without Jobs.

  • Report this Comment On September 27, 2012, at 8:22 PM, Frankydontfailme wrote:

    What I love about these articles are the INEVITABLE peanut gallery bashing in the comments sections. You're not permitted to be negative... or even neutral on AAPL.... long term bearish.

  • Report this Comment On September 27, 2012, at 8:28 PM, mill3417 wrote:

    Everyone's valuation of Apple is modest at best. If Apple can continue to penetrate and excel in lucrative markets, an agreement with ChinaMobile soon would be stellar, and continue creating stellar products, I see the company heading well into the thousands, maybe even the two thousands per share. People just have to have faith and shut out all the extra chatter, which is this article. lol. I got in just a little over a year ago, I'm seeing double, and I'm loving it. Continue the hike Apple!!

  • Report this Comment On September 27, 2012, at 10:24 PM, garret72 wrote:

    This is one of the most clueless articles I have ever read.My advice is still for you to never buy apple.I am a small retail investor that never listens to these so called analysts.This article is complete ignorance.I have owned apple stock since it was $32.00 a share and it has made me over 200.000

    dollars from a initial 8.000 investment.To the author of this article.Come Feb of next year please write again when apple stock hits 775.I will then take you out to dinner and educate you about stocks.

  • Report this Comment On September 28, 2012, at 12:02 AM, techy46 wrote:

    The real problem with being cool is the longer you are cool the harder it is to stay cool. Apple didn't invent cool and they can't patent it so time's running out as long as competitors can reinvent cool. Most things cool rarely last much longer than 10 years except Aerosmith and The Rollling Stones but they keep reinventing it too.

  • Report this Comment On September 28, 2012, at 1:34 AM, Secs27 wrote:

    Apple sells a bit more than just cool. Their iPhone 5 is truly a work of art. It is an amazingly powerful computer in an extremely light and very thin design. It is well made out of glass and aluminum - very high end. No cheap plastic here. It is also very reliable and stable unlike android. The new iPad is also well executed and one use of it will show why it has no competition. It works smoothly and is a sheer joy to use. The only tablet that may offer some competition is the Microsoft Surface Pro. It appears to combine the beauty, quality and portability of an iPad with the power of a full blown computer. I am very eager to try one out. Even Steve Wozniak is impressed with the Surface.

  • Report this Comment On September 28, 2012, at 2:22 AM, Risky88 wrote:

    Lets remember to all of you hardcore apple fans than think apple could never die or at least wont admit it because the stock has done so well for you.

    10 years ago where was RIMM. 30 years ago where was GM.

    The list goes on and on, survival of the fittest!

    Apple didn't break ground with the new phone they LOST IT!

    Everyone in the world EXPECTED a larger screen faster processor etc....

    But what happened they screwed up on their maps.

    Even if jobs was alive I still think apple would have come out with what it just did

    because says it my way or the highway

    I truly do not believe in apple especially after I tried their ipod.

    I do think it could end up as the next RIMM over the next 10 years if they keep up with the snobby attitude and refuse to innovate as they have just shown

    If I'm wrong then it's my loss for not investing the company, oh well, time will tell as always.

  • Report this Comment On September 28, 2012, at 2:26 AM, Risky88 wrote:

    I do have to say though

    I am talking long term

    Over seas could be a whole different ball game

    I am talking about the USA market share.

    But if your an investor why would you care as long as they are selling products and making straight cash money?

  • Report this Comment On September 28, 2012, at 5:28 AM, kensing1 wrote:

    You are the biggest loser! I have made a 56% gain on buying AAPL since January.. You don't like AAPL so you throw it away.. Your loss mate, my gain. Certainly won't be following you, LOL!!

  • Report this Comment On September 28, 2012, at 8:04 AM, Bradmol wrote:

    Hey. If you did not invest in Apple years ago when Steve Jobs was around and the stock was cheap, you obviously missed out on an investment in one of the most successful companies of all times. A company who's CEO was all about the consumer experience and worked for a $1.00 per year. A company that revolutionized the music industry, smart phones, apps and iPads. Why should anyone listen or take advice from you who never had good insight years ago? I'm not interested in hearing your excuses. Why not just say you made a huge blunder and missed the boat. Mid respect you more.

  • Report this Comment On September 28, 2012, at 9:29 AM, bordereiver wrote:

    I am in the middle of these stories. I "traded" Apple in 2008-2010 for about $25,000 profit. Was too scared to make it a buy and hold stock. But in 2011 I decided to ride for a while and rode it up to a lot, so now I play it like a scary stock - when will it bite me. But I think there may be a little more time to run, but I have my finger on the trigger.

  • Report this Comment On September 28, 2012, at 9:59 AM, catoismymotor wrote:

    I have to admt I am of a similar mind of the author. I do own some AAPL indirectly through a different company and a ETF, but no shares directly.

    AAPL is a great, wonderful, shiny company. It is all things to all people, or tries to be. However I will not invest in the company because it is no longer the scrappy, upstart, game changer of old. I'm on the look out for the next AAPL.

    For those of you that own AAPL I wish you all the best. May the stock double from here and then some.

  • Report this Comment On September 28, 2012, at 12:05 PM, Darwood11 wrote:

    It becomes increasingly difficult as technologies mature and are distributed to provide a product which is 'leaps and bounds' above the competition.

    AAPL may be a great company, but there are a lot of great technical companies. The iPhone is no longer an innovative product.

    The dustbin of tech history is littered with innovative companies. I do not imply that AAPL is headed to the garbage heap. However, I suggest that the current AAPL product line be evaluated and compared to what is currently being produced by competitors, and the trajectory these various products are on.

    For anyone born after 1975, it's probable that they are completely unawares that the IBM-PC was innovative and revolutionary in its time and is now replicated functionally by hundreds of companies worldwide in laptops, tablets, desktops and "smartphones." When is the last time the reader bought a personal computer manufactured by IBM?

    Fail to learn the lessons and your investment portfolio will suffer.

  • Report this Comment On September 28, 2012, at 1:35 PM, TimTomson wrote:

    Why I own AAPL?

    (1)low PE (2)Great products (3)great R & D (4)new products in the pipeline (5)new products on the drawing board (6)great balance sheet (7)great income instatement(8)over $125 billions in cash (9)great management team (10)great demand for their products all round the world (11)owning aapl is a status symbol all around the world (12)

    As for me, I did not missed recent >+$100 AAPL share rally, following the signal: http://alturl.com/9wvhg , from May 25

    IMO AAPL is still a buy, but we shall be more careful now.

    Good Trading!

  • Report this Comment On September 28, 2012, at 8:08 PM, Stocklovr wrote:

    Here's the problem with an honest article that, heaven forbid, might question the mighty Apple... this company has more cheerleaders than anything on the planet and simply can't even think of the possibility that they might lose some of their luster.

    I'm waiting for iPhone v92. That one should be great because you can create new and cool cell hones FOREVER... so yeah... boo to the naysayers!

    v6.0 will wash your car with a wave of the iPhone. That should be cool.

  • Report this Comment On September 29, 2012, at 2:56 PM, Archaeologist77 wrote:

    Thanks, but reminds me those whom we should listen to are those who tell us to buy Apple AND Coca Cola (or Berkshire-Hathaway 8.8% Coca Cola). Thus, not either/or but both AT THE OPTIMAL TIME the Motley Fool way.

    Koppenheffer does remind me of someone who could have taken one too many classes with a (bad) religious philosophy professor I once had who insisted HIS interpretation of Wittgenstein's Tractatus Logico-Philosophicus was the only correct one. In reality, what he (the professor) needed was a strong dose of Karl Popper. But still would have been a wasted effort.

    I think Koppenheffer is smarter than that prof for a simply reason, he's a Motley Fool.

  • Report this Comment On September 29, 2012, at 7:00 PM, JAXXJAGUAR wrote:

    Let's see, they manufacture a product that cost approximately $207-225 to make and sell it to the major cell phone carriers for roughly $660 dollars. NO, I wouldn't invest in a company that does that either. I would hold out for that Solyndra IPO. Now THAT will be a great company to invest in. I am long AAPL.

  • Report this Comment On October 03, 2012, at 8:50 AM, NYCOMPOSER wrote:

    I don't really get it. Forget cool, what I it that you dislike about a company with great margins, stellar P/ E, a solid international presence with plenty of room to run, huge cash, no debt, and regardless of what might happen in the future, a supply chain second to none?

    I understand that there's a difference between trading and investing, but surely there should at least some trading in every investing plan. You missed a huge run in Apple- and that makes you proud because you stuck to your disciplined investing philosophy ? Buffett always says he doesn't invest in things he doesn't understand- really, what's hard to understand about Apple's success?

  • Report this Comment On October 14, 2012, at 6:17 AM, thidmark wrote:

    "(i.e. KO which was 31 per then - 38 now)"

    Coke's stock split recently, so to imply that it is only up 7 since the 1990s is kind of a huge error ...

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