Quietly Starting to Worry About Apple

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My history with Apple (Nasdaq: AAPL  ) has been torrid. First I panned the stock, then reversed my position, and now I'm starting to quietly wonder if I reversed it too soon. 

Go ahead and give me grief, but know that I'm not afraid to change my mind when the facts change, or when I've made a mistake. As John Maynard Keynes (allegedly) said, "When the facts change, I change my mind. What do you do, sir?" I think too many investors and analysts are afraid to change their mind for fear of being a flip-flopper. They'd rather feel cocksure but be ultimately wrong. 

Not me. For that reason, I quietly ended my bullish (and winning) CAPScall earlier this month -- after the Maps fiasco -- at $646.98.

And apparently not a moment too soon. Since that date, we've seen an underwhelming iPad mini, and now the unscheduled departure of key Jobs-era players

What makes these developments particularly worrying is that they play into the main bear argument: that Apple without Steve Jobs is not Apple.

One wonders if Apple Maps would have ever been approved if Steve were still around. And we all know what Steve thought of an iPad mini. It appears he might have been right. 

Why long-term investors should care
I'm a long-term investor. I don't pick or pan stocks for short-term reasons. But a bad product launch at Apple is different from one at Coca-Cola (NYSE: KO  ) for a key reason: it's relevant to the company's competitive advantage. If Coca-Cola launches a dud -- like C2 -- it makes little difference since they'll keep on selling Coke. Not a big deal. But Apple's competitive advantage relies on churning out visionary products that just simply work.

Recent events causes one to wonder if they'll continue to do so without Jobs. And that's relevant for long-term investors. 

It's particularly relevant because, unlike Coke, recurring sales aren't assured for Apple. Coke can be pretty sure that Coke buyers will buy another Coke later on, and in similar quantities, but Apple can't be assured that they will sell you another iPad in a year. You might buy Microsoft's (Nasdaq: MSFT  ) Surface instead, or simply delay a purchase. In order for Apple's sales to simply stay even, they have to get a new customer provided existing ones don't replace their order every year. When you've already taken over the world -- as Apple has -- that gets to be a tall order.

It gets be an even taller order when negative information is in the news about your company and its products. 

John Hussman had a great take on this back in April, if anyone's curious. 

Surface rising
Back in March, I bellyached that all of Apple's competitors are incompetent, which was a key reason for my reversal. That finally might be changing, and for an unexpected reason. The Microsoft Surface could be the real deal. That keyboard thing is killer. 

Which reminds me that I still like Microsoft. Microsoft has been my oldest pick here at the Fool, and while it hasn't outperformed Apple, as I predicted, there are still many years left in the decade. 

I'd expect Jobs to be able to repell a vigorous assault from Redmond. With recent news, I'm not so sure about his successors.

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Chris Baines has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple, Coca-Cola, and Microsoft. Try any of our Foolish newsletter services free for 30 days. 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 (5) | Recommend This Article (6)

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 31, 2012, at 8:04 PM, wessew wrote:

    First, there is nothing wrong with the iPad mini other than it is sold out! Second, Steve Jobs made numerous mistakes in his career, including Mobile Me! He was not perfect. Third, the reviews I have seen from independent sources suggest the Surface has serious flaws. Fourth, KO is a poor example. Reason: it sells at 17 times forward earnings while AAPL sells at 10 times forward earnings. Any concerns are baked in the stock price since Apple will likely grow at several times KO's growth rate. So the P/E never expands for the reasons cited! If Apple continues to grow at double digit rates, that is what you will earn. Case closed. The question, due to the low current p/e, boils down to one question: whether AAPL can continue to grow at double digit rates. I will take that bet over the intermediate term given the global opportunity spread across multiple product platforms most of which has rising market share opportunity.

  • Report this Comment On October 31, 2012, at 9:02 PM, tychicum wrote:

    Good grief grow a pair.

    This company has a zillion dollars in the bank, has products everyone loves and has one big problem ... it can't make its products fast enough.

    If every other company in America had these problems the economy would be firing on all cylinders.

    Find some real news and quit pandering to those who would rather invest in CDs and go broke by death of a thousand cuts.

  • Report this Comment On October 31, 2012, at 9:04 PM, mythshakr wrote:

    Apple without Steve, Apple without Steve, Apple without Steve. That is all that you hear. Blah, blah, blah. Anyone who has worked at Apple for some period knows that Steve was the face of Apple more than the primary innovator. Steve said it better than anyone that it was the team that made the magic not him. That being fired was the best thing that ever happened to him because it taught him it wasn't all about him. I think in the next 5 years you find that Steve's greatest accomplishment was not the gadgets but the company itself. It is designed around innovation. That is what he wanted. Apple was his child every bit as much as his daughter and son and he wanted this child to be more than even he could ever imagine.

    Apple is not perfect, not by any means, nothing in the mind of man ever is. And mistakes will be made, most likely some whoppers, but how Apple gets beyond those missteps is what matters in the long term.

    Will there be other lines of gadgets? Probably. will there be continuing evolution of the existing gadgets, absolutely. When I left Apple they took my company iPhone. I now do not have any cellular phone. I still consider them all too kludgy. Everywhere I go I see people with their faces glued to their smartphones. How antisocial is that? I do admit my older eyes have difficulty with seeing the screen also. The first smartphone I will unable to pass up will not even have a screen to stare at but an intuitive non visual interface. And I've got $5 says it will be an Apple.

  • Report this Comment On October 31, 2012, at 9:13 PM, appleamillion wrote:

    Your article appears to be a plant from a short hedge fund, somebody who is shorting or a paid mole from either Samesung, a microsoft or Android mole. Steve Jobs had the antennagate, and wasnt going to do anything about it, he okayed a faulty hardware design. Microsoft has not proved anything yet regarding its new tablets or phones. 90 percent of mobile internet traffic is via an ios device. That is why Google needs Apple s customers, or its search click business would be decimated. How long will Google provide free OS, who knows, France and Germany now want Google to share revenues on searches, they want 1.3 billion dollars from Google, There is an FBI warning about free apps that work on Android as virus magnets. A closed system like Apples will provide much better security, especially when payments are made with IPhones., for the future. Self driving cars are not going to pay bills at Google, when the first carcrash and lawsuits start, lol. Apple is atleast 4 or 5 companies combined, Samesung has a good phone in Galaxy 3, but it is a Hyundai, not a Porsche, and talking about innovation, Apple presently epitomises refinement and intuitive user experience across product lines. I love seamlessly moving from my IPAD to Iphone to my MAC without having to learn on different manufacturers devices. I am perfectly happy in Apple s walled garden. Both Android and Microsoft are is immitating Apple right now, where is their innovation (Google glases) thats a joke. I think they are all waiting for Apple to come up with something new. Presently,at teast for me, the WOW factor is in using an innovative software system from Apple that JUST WORKS, thats what I want, it to JUST WORK. Ill be with Apple a long time.

  • Report this Comment On November 01, 2012, at 1:18 AM, SpeechRec wrote:

    Factually incorrect is your statement: "unscheduled departure of key Jobs-era players". Only 1 (high-level) Jobs-era player, Scott Forstall, is departing. John Browett (the just-terminated retail chief) was hired after Jobs died.

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