Buying Apple Again

I bought Apple stock at $192, down 17% from its high. I expect to make a painless 17%+ profit, so long as I'm patient enough - and have a strong enough stomach to watch it dive even lower first (if it does, and I expect it will, I'll keep buying more).

Here's the con currently at work: Apple, as an immense corporation, doesn't handle production and stocking like a normal company does. It uses very sophisticated and counterintuitive methods (this is Tim Cook's seldom-mentioned genius expertise, btw) that don't necessarily appear rational when viewed in some arbitrarily thin slice. Tim Cook has publicly noted this several times, and all Apple analysts and journalists understand this, yet the newsfeed at Yahoo Finance reveals a very large number of crappy news sources repeating "disappointing" stats for iPhone supplies/stocking, many of them using scary language. Like Russian social media bots, it's starting to contaminate mainstream channels, as well.

Even if the reports are correct - even if the new iPhones are less than the expected breakout hit - it hardly justifies a 17% downturn. So analysts and journalists who know these stats are deceiving, and know this sell-off is already irrational, and who've witnessed this same con a number of times before, are, for various reasons, piling on and exacerbating it. The big reason, as always, is money. There's profit to be made on a plunge, and while I'm nowhere near savvy enough (much less quick enough) to benefit from the downturn, I, by sheer virtue of brutish patience and contrarianism, can definitely benefit from the inevitable recovery. I've done so many times (I pretty much live on recoveries from Apple downturns), though it's lonely. There aren't many people buying at times like this.

With any other company, this would be a much riskier strategy. Many stocks suffer seemingly irrational dips, sometimes substantial, but Apple is a unique case where you can count on the dips being spring-loaded. The stock price may sink but it won't keep plunging all the way down to irrelevance. I noted last year that Apple's cash hoard alone (not counting their talent, their sterling brand value, and their diversified product line) acts as a safety net:

The risk is that it won't recover next time - that the most successful company in the history of the world, sitting on a cash pile of $250 billion, will shrivel up and die because of some fleeting issue.

I just don't see that as a real risk. That cash hoard alone - which doesn't even do anything! - dwarfs the total market value of all but seven other corporations. Apple could throw their entire mega-successful business in the garbage and buy Starbucks, Boeing, and Goldman Sachs. If customers update their iPads more slowly than expected, or a phone antenna doesn't work properly, or a new product line undersells expectations, that's just not going to cause a death spiral. I'm not saying they'll be dominant forever...but the downside of buying at Apple's inevitable 30% bullish downturns strikes me as minimal.

That cash hoard is currently at $238 billion, fwiw.

This time, I'm slightly more sober. Apple is highly dependent on the Chinese market, and we are in the midst of a trade war. One might try to anticipate the likelihood of splashback on Apple, but I'm nowhere near informed enough to predict the PRC's actions. This risk (not even mentioned, btw, in the current bear campaign against Apple) means I can no longer say that Apple has a near-certain safety net as an investment.

Last time I bought Apple stock in a downturn, the risk of the company falling apart and my losing everything was near-zero. Now, it’s non-zero. But still very very low.