Sunday, April 22, 2012

Having the courage of my convictions

Listening to the radio while running errands Saturday, I heard a stock technical analyst (on his own infomercial) brag that by using charts, he bought Apple stock at (split adjusted) $12 in 2004. (Even with the recent correction, AAPL closed at about $573 on Friday.)

It was obvious that he knew nothing about the stock or the company when he bought it, but instead was reacting to trends in the shares. I get it: that’s what technical analysts do.

On the other hand, I know more about Apple, its history, its strategies, strengths and weakness than the majority of potential investors out there. I was an Apple software developer for 17 years. I did my PhD on Apple. With Michael Mace, I wrote perhaps the first academic research paper on the iPhone and the reasons for its success. But I never bought a single share of Apple stock after Steve Jobs returned. (In the 1980s, AAPL had a well-defined trading range, so I’d buy it for $25 and then dump it when it got up to $50 — then repeat the pattern.)

Some of this is because I’m not an active investor — I’m too busy. Some of this is because I have trouble judging “under valued” because I can’t assess the market psychology required to make that interpretation. And then there’s the conflict of interest: I sold Qualcomm shares H2 2008 because of the conflict with my SD Telecom blog. This was the only holding I cashed out before the financial crash, but I missed a net runup of about 40% since then.

So after hearing the expert on the radio, I thought I’d check when I might have bought AAPL.

The first of my 115 (so far) iPhone postings came in the ninth posting to my blog, on January 29, 2007. The posting summarized what a news report said about Apple-Verizon negotiations that led to AT&T getting a US exclusive. AAPL closed at $86 (I’m rounding to quarter-points).

On May 1, I opined on Apple’s sales prospects (AAPL closed at $99.50). I was very cautious on iPhone sales:

My prediction: the iPhone ramp-up is going to be slow, due to manufacturing problems and the Cingular exclusive, and thus only sell about 1.5 million phones in 2007. Over time, they will solve this with model proliferation beyond Cingular and eventually tap overseas markets. Therefore, I believe Apple will beat its (deliberately understated) prediction of 10 million phones sold for June 2007 - December 2008.
Instead, Apple sold 3.7 million phones in 2007, so I was off by more than 2x.

On June 2, I presented the first slides from our iPhone paper that said:
Our Premise
The iPhone could change the mobile phone industry:
  • Nature of devices
  • Vendor-consumer relationships
  • Vendor-operator relationships
  • Value and use of content
Of course, there are limits to drawing inferences based on vaporware
Apple shares closed at $118.50 on Friday June 1.

Finally, after the original iPhone mania the shares pulled back July 24 on AT&T activation news, closing around $135.

Normally I speculate in tech stocks with $10k in my IRA, but let’s assume I put $20k in after I gave my iPhone talk June 2. That’s $20k would be worth slightly less than $97k today.

So I “lost” about $75k not investing my money where my mouth was. That wouldn’t put me on easy street, but it might have allowed me to retire a year or two earlier, or pay for a year of college for my teenager when the time comes.

Given Apple is not going to retrace the past five years, I’m not sure what’s actionable here. And unless I’d bet on AAPL to the exclusion of almost any other tech stock, my wins would have been diluted by a stock that went sideways (MSFT) or lost money (NOK down 7x).

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