Buying Apple

There seem to be two ways to look at Apple stock.

On first glance, it is a strong buy. It has grown at least 8x in the last 2 years. If I have put all of my investment money into Apple back when I first started buying Macs, I would be a very happy man. Instead, I have languished as a casual investor making OK returns, but I find it depressing that all that money can’t do something more (and it will, it’s going back where it belongs, in the business).

If you have been buying Apple products for the last 3-4 years, you know that they will keep surprising us. That is a good thing. Surprise and a great platform to announce that surprise from, along with millions of minions like me who tell their friends and family that they should “just get a Mac”.

Things are positive. Apple will only sell more iPods, perhaps double the number 2 years from now. The iTunes Music store, assuming the labels don’t kill it, will only sell more. In fact, if the labels do kill it, a huge amount of Indy music would find a home there.

Podcasting has almost guaranteed a strong future for Apple in the next 2 years. Using GarageBand you can now produce incredible and rich podcasts, you can even upload them to your .Mac account without knowing a thing about what is happening. That sure will change the Christmas update letter from Uncle Adam.

Video is going to be another hit. Apple is still figuring out what they will do in this space, but they already have the best home video editing software on the planet. With iMovie, my sister or mother can put together an incredible DVD of family video in an afternoon.

What’s not to like?

There are a few things that joe-blow investor should probably look out for.

The first problem is that Apple seems to be quickly becoming a darling stock. Big institutional dollars are flowing in, and that means that big institutional expectations are starting to put pressure on Apple activities. We are starting to see this already, after Macworld 2006, pundits on ROB and MSNBC were complaining that Apple didn’t make the move into home entertainment that they expected. Steve Jobs now comes under certain expectations, and if he doesn’t meet them or goes in another direction, the stock will get punished. If you are like me, these changes that institutional investors don’t like would be the same changes that make a world of sense to you. You might even buy in for more, while someone else with a big portfolio will decided to move some huge amount of $ out of Apple. We get caught in the crossfire and have our values hammered.

The other problem that I see is that Steve Jobs has cancer. I realize that he has beaten it, and it is even a form of cancer that has a high recovery rate, but it is still Cancer and Apple really is Steve Jobs. Nobody in the world deserves to have their illness under such scrutiny, but you need to consider that when buying.

In the short term, I will buy more Apple, but I will be out by Summer at the latest. Not because I don’t think it would make money in the next 12 months, but because I really don’t have the time to watch it all day. I am not a professional, I am not even at the amateur level yet.

There is really no reason to look to me for investment advice, go hire a professional.

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