Friday, December 18, 2015

Trying to Understand Apple Investors

So Apple's stock is down 25% from its high, thanks to the random herd scare du jour. And no one smart doubts it will eventually it always eventually does.

So why not buy here? If the price recovers in two years, you'd make a return of 12.5%, plus dividends. If it recovers sooner, you'd do better, still. And risk is crazy low; no one imagines that Apple is poised at some horrendous cliff of extinction (then again, I didn't think so with SIGA, either).

It seems absurd to think that my shlubby self has spotted a clear pathway to profit no one else did. Plenty of other people surely see what I see. So why aren't they buying at this bargain price? Two reasons, I think:

1. They're too greedy to buy until the current dip goes all the way down. 25% discount's good, but 26% would be even better! Of course, one can't possibly spot a bottom as events unfold. But greed keeps buyers on sidelines, which prolongs the plunge. They'll buy - probably higher than at the current $106 - on the way back up.
This is why one should always park at the near end of big events. Disappointed multitudes park en masse on the other side, all the way to the horizon.
2. They're too greedy to wait the year or two for recovery; they think they can do better than 12-25%. Nobody likes to park their investment.

OTOH, I've bought upon all of Apple's irrational dips over the years, and the profits have paid an awful lot of bills.

Will I be wrong this time? Will Apple forever remain at this price (I'd lose nothing, but not make any profit, either)? Or, worse, are they about to crumble, messing me up as badly as the aforementioned SIGA did? I don't see either happening. So I can't imagine a reason to turn down a 25% profit. Even if it means parking my investment, and losing a shot at 26%.

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