As you’ve no doubt already heard, Steve Jobs lost his battle against pancreatic cancer at the age of 56. I’ve been a huge fan of Jobs and Apple for years. I run nothing but Macs for my business and home. And recently I began investing in Apple stock. With the death of Apple’s leader and visionary, one question every investor in the company should ask is this–Should I sell my Apple stock?
My Investment In Apple Stock
I purchased 30 shares of Apple in my SEP IRA account with Scottrade (Read my Scottrade review if you are looking for a discount broker). The trade was executed on April 21, 2011 at a per share price of $378.25, making my total investment in Apple $10,556.50. In about six months, my total return is 7.49%.
While I’m happy with the stock’s performance to date, the loss of Jobs must be considered in evaluating the investment. Much like Warren Buffett is to Berkshire Hathaway, Jobs was the vision and driving force behind Apple’s amazing string of product and financial successes.
Why I’m Keeping My Apple Stock
When I purchased shares of Apple back in April, I decided then to keep the stock when Jobs passed away (with pancreatic cancer, it was only a matter of time). Had I been unwilling to stick with Apple after his death, I wouldn’t have bought it in the first place (same goes with Berkshire Hathaway and Warren Buffett). An Apple without its founder is still a great investment, in my opinion, for several reasons:
- Apple’s Balance Sheet: As of June 25, 2011, the company had more than $28 billion in cash and short term investments, on top of more than $11 billion in net receivables. Its total current assets (assets that will convert to cash in under one year) were just under $50 billion. Its total current liabilities (those that are due in less than a year) were just $27 billion. In other words, Apple is a cash-rich company.
- Apple’s Product Line: Apple has a strong presence in the smartphone market and is dominating the computer tablet market.
- Apple’s Stores: I remember with Gateway spent a ton of capital opening physical stores. That move was the beginning of the end for the company. Apple, on the ohter hand, has hit a home run with its stores.
- I Love Apple’s Products: This is where my emotions take over, which is bad news for an investor. I love everything about Apple (well, except for Migration Assistant, which NEVER works). While this doesn’t make Apple a good investment, it’s enough to keep me in the stock I’ve already purchased. That said, I don’t plan on buying more shares anytime soon.
I also hate selling an investment. So unless I see a good reason to exit a position, I leave it alone.
Why Some Probably Should Sell
Let me say at the outset that this is not intended as investment advice. I don’t know whether you should sell your Apple shares or not. That’s your decision. But I do think the company is in for some hard times. Here’s why:
- Competition: As good as Apple’s products are, there is a lot of tough competition in the market. The Android OS has the lead on iOS, and its lead is widening (43.7% versus 27.3%). And while Apple still dominates the tablet market, its market share this year is lower than last (83% last year, 73.4% this year).
- Stamina: Right now Apple is about as good as it gets. Can it really continue to innovate and grow at the pace we’ve seen over the last 10 years? I would have doubts about Apple’s future growth even if Jobs were still here to lead the company.
- Products: Apple has hit home runs with the iPod, iPhone, and iPad. While these products will continue to play a dominate roll in their respective markets, what’s Apple’s next move? And how much incremental revenue can the company generate through further enhancements to these products? We can’t expect every product Apple introduces to be a smashing success (remember the Apple Newton?).
I’m personally not optimistic about Apple as an investment. Still, its P/E is just 15, and I note that as of 10:30 ET the day after his passing, the stock is up .75%! I’m keeping my shares, perhaps in tribute to Jobs. Not a good reason to stay in an investment, but its stockpile of cash can help me through the rough patches.
I’ll leave you with Jobs’ 2005 Standard commencement address. It’s definitely worth a few minutes of your time.
Published or updated October 6, 2011.