Idiot Investors Don’t Trust That Apple Can Keep Making Magic New Products


Photo by triplefivedrew -
Photo by triplefivedrew -

When it comes to huge investors who buy mammoth blocks of Apple stock, there’s only one question: what have you done for me, lately? If you want to know why product launches are so important to Apple, it’s because the launch of a new product is critical to investors who believe Apple isn’t worth a plug nickel without its latest and greatest products.

Unlike the analysts who make daily pronouncements about Apple’s ecosystem or the wisdom of Tim Cook versus Steve Jobs, so-called ‘buy-side’ analysts who own 70 percent of the tech giant’s stock think the Cupertino, Calif. company is only as good as its latest product. In other words, after the heat from a product unveiling cools off, big time investors are nowhere to be found.

Asymco’s Horace Dediu recently talked to several of these usually tight-lipped analysts and found when Apple released the iPod in 2005, company stock shot up. By 2006, Apple stock was down again. When the iPhone was unveiled in 2007, institutional investors snapped up Apple stock, but dropped it in 2008 and 2009.

Seeing a pattern here? For big rollers on Wall Street, there are no warm and fuzzy feelings about Apple; just cold, hard calculations.

“Apple is a rather small collection of product bets,” Dediu wrote yesterday. “Owning Apple meant riding the iPod or the iPhone or the iPad as waves of growth. As soon as one growth wave was seen to start to fade, investors would say the same thing: Apple is done,” he added.

Which is ironic. Apple has always wanted to be seen as a media company, rather than a computer maker. Indeed, Apple dropped the word “Computer” from its corporate name long ago. Now, Apple is being judged like a Hollywood studio on its latest products — and it had better produce more Titanics and fewer Ishtars.

But that sort of investing with a short memory undervalues Apple’s long-term goals, placing more pressure on Tim Cook to announce big new products, rather than incremental changes or decisions that do not quickly produce a visible result. Great for the huge investors who jump in when Apple is scalding hot, then vanish in a puff of smoke (along with a few billion dollars profit) once a product starts to cool off. But such here today, gone tomorrow sort of financial planning doesn’t serve Apple or its loyal following well at all.

  • FriarNurgle

    Isn’t all stock trading down by computer algorithms now? These blow hards just sit back and spew BS while raking in the dough. 

  • esizzle

    a 50 point drop is 10% – it’s nothing.  stocks don’t go up in a straight line.  it’s down less than 15% from the high.  a breather, profit taking, etc. investing is not about “warm fuzzy feelings.” 

  • 300AShareMakesMeSmile

    Hedge fund managers are the curse of individual investors since they work only for the most wealthy clients.  It’s the hedge fund managers that the Occupy Wall Street should be going after.  Hedge funds have to much power and cause damage to companies that are working hard towards the future.  Unfortunately, there’s no way to beat these greedy manipulators because they’re allowed to control Wall Street doing whatever suits them to turn over fast profits.  These hedge funds don’t contribute to any company over the long term.  It’s just in and out for them.  One more reason the U.S. is in the economic mess it’s in.

  • Gregintosh

    The American corporate culture rewards short-term thinking and gains, and punishes long-term investments. It doesn’t matter if spending some time developing something for the future would really pay off long term, if you can’t beat your quarterly expectations (higher than the previous quarter) then you are out. Simple as that.

    This culture starts at the top and permeates all the way to the bottom. That’s why supervisors, managers, etc. are all given monthly bonuses and quarterly bonuses and not bi-annual bonuses or ones tied to long term performance.

    The result is that managers and executives will undermine a company’s future for a profit today. And that’s how we arrive at seeing big companies ran by the “smartest people in the world” going bankrupt over time.

  • djrobsd

    It’s really sad that corporations are ran by investors and not by their CEO’s.  In today’s society, corporations are expected to squeeze every penny out of everything, and it’s still not good enough for these greedy investors who want instant returns on all their money.

    I predict that Apple will become the new Microsoft…  Unless Tim Cook can keep Steve Jobs spirit alive, and say FU to Wall Street, and do what’s right for Apple and it’s ecosystem rather then just trying to pump out another percentage worth of profit margins or come out with a hot product months before it’s actually ready for prime time.

    I have a lot of respect for Apple not releasing the iPhone 5, and actually waiting until it’s ready.  I also have HUGE respect for them taking this huge gamble on iTunes Match.  I’m sure that’s the main reason why investors are selling off – they realize that iTunes Match is going to generate huge cash drains on Apple’s profit margins.  But in the long run, it’s going to further cement people like me who would normally drop iOS in a New York minute if Android finally got better, but now I am locked into the Apple ecosystem with my iTunes Match, which DOES NOT run on Android, so there ya have it folks…. 

  • MrMLK

    Pardon me while I interrupt your anti-American tangent, but can you point out a country whose corporate culture doesn’t reward short-term thinking and gains?

  • zeiche

    Where does Ed get this stuff? Apple always wanting to be a media company? “The Mac, iPod, Apple TV and iPhone. Only one of those is a computer. So we’re changing the name,” said Steve Jobs. Where is media mentioned in Steve’s announcement? Ed, please do basic fact checking. Even simple Google searches will help. In the absense of facts, please provide links or other reference to back up your assertions. Or simply label the piece as opinion.

    Oh, and product announcements are important to Apple, but not for the reason Ed suggests. In my opinion, Apple’s product launches seem to be tailored to please their customers, not used as a tool to appease investors. That is what their periodic conference calls are for. (See how that works, Ed? Label factless information as opinion.)

  • Shaun

    Unlike most public companies Apple does not pay a dividend, so the only way to make any money from the company if you are an investor is by speculating on the share price. Sell at the peak, buy at the trough. Apple needs to keep delivering steller products otherwise there is no short term gain in holding their stock. Investment companies are always about short term profits. If Apple paid a dividend that would be different – they would start to see more long term shareholders willing to take the dividend rather than short term profits. Apple sets the rules of the game so they can’t complain.

  • imajoebob

    China (of all places).

  • aardman

    Be careful to make a distinction between coporate culture and investor culture.  I tend to think that German and Japanese corporate cultures are more long-term oriented than their American counterparts.  Or more to the point, they are less susceptible to investor culture contaminating their corporate decision making.

  • imajoebob

    Genius! What kind of idiot thinks ultimate control freak Steve Jobs, dealing with his impending demise for years, would bother to leave behind some sort of plan – like maybe a 10-year plan detailed down to the week – with his hand-picked successor.  

    Yep, the sky is falling!

  • Deocliciano Okssipin Vieira

    No wonder USA lost a decade with BUSH administration ( … and it looks like some people miss Bush already ), this IS what is wrong with USA, making things IS NO longer a priority but creating shadowy banks.

  • Mike Rathjen

    No, no. Clearly this is the fault of the Rutherford B. Hayes administration!!!