A wild ride for investors
The result has been enriching for investors. Apple shares have provided fabulous returns, but it's important to understand how they behave. The shares have suffered at least seven major sell-offs -- falling at least 25%, usually quite a bit more -- in Apple's 32 years as a public company.
The worst was the 91% selloff in the dot-com bust and the 9/11 aftermath. But if you had jumped into the stock on April 17, 2003, when it closed at $6.56, you'd be up 7,903%.
After reaching $200 at the end of 2007, the stock fell 61% to $78.20 on Jan. 20, 2009. The stock is up nearly 560% since, selling for more than $510 a share.
This all sounds great, except for the 26% pullback since September. What's happened?
● Hedge funds, which had been Apple's biggest owners, may have started to take profits, fearing higher taxes in 2013.
● The stock has fallen under its 50-day and 200-day moving averages, key confidence measures.
● Apple's fourth-quarter results missed Street estimates. The Street was looking for $8.75 a share; the company reported $8.67 -- still a gain of 23% from a year earlier.
● There are worries that profit margins will shrink from increasing competition. Thanks to faster networks, you can download apps to your phone from the Web. You don't need Apple's App Store.
● Apple misses Jobs' passion. The company hasn't been able to suggest what the next big Apple thing will be. There's lots of talk -- but nothing concrete -- about an actual Apple television.
● The current technology cycle -- built on the rise of the Internet, online commerce, social networking and the cloud -- may be approaching its peak, and growth rates could stall.
It's possible that Apple's stock is simply consolidating for another run-up that will start after it reports fiscal-first-quarter earnings, probably on Jan. 24. Then again, the stock briefly topped $700 a share in September; even if it regains that lofty perch, it's not clear what could move it seriously higher than that.
So if the big gains are done, what might be the next Apple?
From the very big to the small
Defining such a stock isn't easy, and finding one is even tougher.
If you just want a big groundbreaking tech company getting bigger, but with more room to grow than Apple, Amazon.com (AMZN) is a good candidate. So is Google. Don't forget Samsung Electronics(SSNLF), which is both an archrival and a partner of Apple.
Samsung's Galaxy III and Galaxy Note II devices have won rave reviews and are selling briskly. Some analysts believe the devices are more advanced than Apple's. The stock, listed on the Korea Stock Exchange as 005930:KS, is up 45% this year in Korea.
Google has licensed its smartphone operating system to Samsung. In the view of Mark Anderson, of the Strategic News Service, the Internet search giant’s groundbreaking work on driverless cars; Google Glass, a computer built into the frames of eyeglasses; and its maps and global positioning systems’ features have the potential to provide new growth. And, he added, Google has a fantastic advertising business; shares are up 41% this year.
Amazon is an entirely different business, built to drive prices and profit margins ever lower in what to Anderson looks like a quest to overtake Wal-Mart Stores (WMT). But investors love the stock, which is up 49% this year. (I wrote about it recently in "Buy the next Amazon.com.")
The risk with seeing any of the three as the next Apple is that they are all so big already; Samsung's revenue will probably hit $182 billion for 2012 and maybe $199 billion in 2013. And there's a chance that the shares for all three could fall back hard.
If you're looking for game changers that, like Apple, could ultimately change the world you live in, you have to look deeper.
Some of the most interesting candidates are those creating new mobile payments systems that allow you to buy something by simply swiping a card on a tiny reader that communicates with your bank. The players here are still private companies Square and LevelUp, along with eBay's (EBAY) Pay Pal.
You'll find similar potential in the fields of electric cars and in the closely watched technology of 3-D printing. From these fields, I've drawn three potential next Apples:
- Tesla Motors (TSLA). Many believe that the maker of high-end electric cars is ahead of others working on similar vehicles.The question is when the company will start generating profits. Analysts believe 2013 will be the year. One drawback is that Tesla's offerings are not priced for a mass market. A second drawback is that batteries last for only about 200 miles on a charge. So driving across, say, Montana, would require multiple recharging stops.
- Square. The privately held company's payment device may change how we spend our money. And a lot of money is betting that it will. The company raised $200 million this summer, which implies that the company is worth some $3.25 billion. The company's square credit-card reader plugs into a smartphone’s earbud jack, helping individuals and small vendors -- such as taxi drivers and nail salons -- accept credit card payments on their phones. Square provides the reader, and the software free, but it charges users 2.75% of any transactions. For each fee, it collects a small portion and sends the rest to the relevant credit card company.
- MarketBot. The company makes 3-D printers that allow consumers to print something in three dimensions -- a solid object from a digital model. Literally. (Search on Bing for more on the technology.) MarketBot offers such a machine for $2,200. Like Square, though, this is not yet a public company. And that, of course, is the hitch.
Investing in Tesla is a leap of faith that requires patience. For either of the two others, you'll have to wait for a potential public offering to get in on the action, which also requires patience. (You can find early speculation about a Square IPO online already.)
But finding a stock that rewards investors the way Apple has will never be easy.
At the time of publication, Charley Blaine did not own or control shares of any company mentioned in this column.
