Last week, I wrote a column based on an email from Jim Cramer’s old assistant Will Gabrielski. In the article, based on his request, I’d gone back and looked at some of the old articles from 10-15 years ago that I’d been writing about Apple. Will wrote back:
“Just read your whole article. Funny to see how in 2004 people thought AAPL was expensive and today people think it’s expensive and back then people thought units might miss and today people worry about how close Apple units come to some otherwise baseless unit estimate and some Taiwan chip data point. Remember when GOOG sold off on ipo in 2004 also on the expensive argument?
Here are my [Will Gabrielski’s] thoughts on Apple based on what we know today vs when you were buying/writing about it 15 years ago (80% of the following is copied or incorporates lessons from Charlie Munger and Warren Buffett):
A) long investment horizon is the easiest “edge” and requires no education or IQ advantage
B) today’s ‘expensive’ stock might just be today’s value stock if the fundamentals are there and you adhere to A (was GOOG or AAPL expensive? No. Are they today? No.)
C) people don’t know how to define value
D) all investing is value investing
E) investing is not speculating on units
F) Apple generates ever dollar of profit growth without any increase invested capital — It’s like capital nirvana
G) I’d bet 80-90% of shares traded daily at by people that haven’t read their filings or opened xls to understand that 10% fcf yields are uncommon period. But beyond uncommon when you consider growth comes without incremental cost
Anyway easier said 10 years too late but I still think AAPL sees 2-1 favorable risk reward.
These are terrific points and if any of you long-time subscribers/readers of mine remember Jim Cramer’s brilliant young research assistant from 15 years ago, Will Gabrielski, you aren’t surprised at his insights above.
I also got a response from a very long-time Trading With Cody subscriber after I sent out that article looking back at my Apple analysis from fifteen years ago in which he asked me to stop looking back at my old analysis so much.
But here’s the thing about why it’s so important to look back. First of all, I’ve mentioned before that, quite honestly, sometimes I can’t believe that I have had some of the homeruns and long-term track record of finding some stocks that have gone up hundreds or thousands of percent. And since we’re always trying to find the next Apple at $1 or Google at $45 or Nvidia at $30 or Axogen at $4 or bitcoin at $100 and so on (yes, I’m looking back at my track record and picks again, I know, but I’m making a point here, stick with me), it’s critically important that we go back and look at the analysis that led us to have actually created this long-term track record.
For example, if we’re trying to find the next Apple at $1, before it went up 186x (and counting as its hitting yet new all-time highs again today), then let’s see how we did it and what, if any, stock of ours today might be most likely to be “The next Apple at $1.”
First of all, as I often remind you guys, it’s important to pay attention to the broader economic and stock market cycles and so we need to first point out that when I first started investing in Apple back in March 2003 that the Nasdaq had just finished coming off of a 75% crash. Yes, the Nasdaq dropped 75% from its highs of March 2000 to its bottom in October 2002. Five months later, in March, Apple was still in crash territory and I was able to buy it at a valuation that was less than the amount of cash the company had on its balance sheet. With the Nasdaq down 75% from its highs and bumbling along at a bottom with many tech stocks still crashing, I was also buying a select basket of other technology stocks that were down 75% or 90% or more from their highs and which were trading, like Apple, at a negative enterprise value (meaning they had more cash in the bank than the stock market was valuing their stock. Side note, recall that when I started buying The Street stock in 2016, the company had a negative enterprise value).
How about today? Is the Nasdaq down 75% from its highs? Are there any decent tech stocks that are trading for less the cash in the checking account? Are there dozens of them like there were back in March 2003? Definitely not.
And when was the last time I told you guys that I was loading up aggressively in stocks, and in App Revolution stocks specifically? It was back in 2010, 2011 and 2012. These days, in 2018, while I’m still not outright bearish, I just keep reminding everybody to remember what it felt like the last time the markets crashed and you were sick to your stomach. And that valuations are stretched, much less are there any decent tech stocks trading at below cash.
Then again, even if you missed the first triple as Apple went from $1 to $3, there was still the move from $3 to $185 to ride. So what stocks do we have right now that, like Apple when it was at $3, was still far down from its all-time bubblicious highs, a fallen star that just might be setting up to create Revolution after Revolution from the iPod to the iPhone to the iPad to…well, let’s not discuss the lack of innovation since Steve Jobs’ death in this column, as I don’t want to digress here. What Revolutions are being planted to rival the Smartphone Revolution and App Revolution?
Cryptocurrencies, maybe, but again, I think that the cycle in Cryptocurrencies is in the Great Crash phase, much like the Nasdaq as it fell 75% from the year 2000 to the year 2002. Remember that I recently nibbled what I think might be “The Amazon of Cryptocurrencies” as I explained that Amazon itself crashed 90% from its 2000 highs but that the stock bottomed almost a year before the Nasdaq itself did. (And again note the importance of looking back to the past cycles and my own analysis and lessons learned from those past cycles so that I could apply that to what’s going on in the Cryptocurrencies right now which led me to go ahead and start nibbling Stellar Lumens despite thinking that The Great Cyryptocurrency Crash is NOT over.)
AI, Driverless, Robotics are all Revolutions that I’ve been actively analyzing, writing about and investing in for several years now. And while the valuations in those sectors are stretched, I do think we should keep digging and be ready to invest further in as we find the opportunities.
I promise you that I’m constantly looking, analyzing, studying and trying to find the next Apple, Amazon, Google, Facebook, Bitcoin, Axogen, Nvidia, Solar Edge, First Solar, etc. Speaking of Solar Edge and First Solar, recall that when I first invested in each of those, they were down more than 75% from their all-time highs. Again, a lesson is in there by looking back.
I want to thank all of you for being a part of the Trading With Cody community, both those who have been reading, following and subscribing to my stuff for ten or fifteen years or even longer.
Finally, I’m going to go ahead and follow some of my own advice and trim a tiny bit more of my very long-held Apple position Tuesday morning, maybe just 5% or so like I’ve been doing for the last fifteen years since I first bought it…and yes, I’m finishing this article by looking back! LOL