No one loves Apple (AAPL) the way you love Apple. You there, writing in comment sections on stock boards and Twitter (TWTR). Yes, you. You love Apple most, best and always. Your cost basis is under a dollar and you will never, ever sell.
After spending much of 2013 mourning various life changes and tragedies, Apple has been storming higher in the 2014. Shares are 15% higher for the year, 20% higher in the past three months and apparently ordained by some higher power to hit all-time highs above $700 ($100 after the weird 7:1 split).
This is the conventional wisdom. Debate is futile. Apple is the largest stock on the planet again. The stock is friskier than California Chrome in the paddock. No one wants the other side of the bet when the colt is coming down the backstretch with a two-length lead.
In the attached video, Yahoo’s Phil Pearlman and I discuss whether or not this is an actual rational move or something resembling a cultural craze.
Fundamentals: The Hotel California operating system
There is a real bullish case to be made for the work done by CEO Tim Cook. It’s not a case of innovation. There hasn’t been a TV or wearable device or much of anything new out of Apple in years. What Cook has done that’s genuinely impressive is pivot the company from an iTunes model that sells digital content to a streaming world that collects your content and lets you access it from a bunch of different devices.
Yes, this is obvious stuff but it’s not something Apple has done particularly well historically. iCloud has been a disappointment. iTunes is tired to the point of antiquity. With Beats and a dozen different features that “borrow” from everything from Snapchat to Dropbox, Apple is making a full-blown move into making it a huge, raging pain to move out of its eco-system.
Moats work both ways. They keep competitors out but they also keep occupants from leaving. Restless natives in the kingdom of Apple are about to discover just how hard it is to leave the castle.
The Psychology: Riding the wave
“Markets are not efficient,” offers Pearlman in the aforementioned clip. “Sentiment occurs in waves, over time. Last year was not Apple’s year.”
This year rather obviously is. The iPhone 6 should arrive with the operating system this fall. The worst that can be said about the stock before then is that everyone seems to be leaning to the same side of the boat. When that happens, stocks can get swamped by sudden shifts.
Someday Apple shares will top and correct. Nothing lasts forever, but betting against the stock with this much money still pouring into it is contrarian to the extreme.