News alert: Apple is worth more than Poland. Nope. Apple’s market cap is over $500B. Poland’s GDP is about $480B. It sounds like a story, but it is comparing a sum to a rate, a savings account to a paycheck, a house price to a mortgage. Despite that, Apple’s achievement is impressive. My portfolio could have been equally impressive, but I was young and emotion ruled an early decision. Fortunately, I learned. Hopefully, I’ll benefit from my experience. It’s happened before. It can happen again.
The story about Apple and Poland is similar to the stories that compare Bill Gates’ wealth to various countries. Forbes has a reasonable article about it, so I won’t repeat it in depth here; but, I will add another analogy. Comparing wealth to income is like comparing the capacity of your gas tank to your miles-per-gallon. My Jeep has a 20 gallon tank and gets about 20 mpg, but they aren’t equivalent. They do suggest that I can drive 400 miles though.
I applaud Apple’s success. I’ve always been a fan, thought not a fanatic. I’ve even recently lamented my reaction to my new MacBook in the post “A Mac is Not a Toy“. The joy has gone away, but the value remains.
My Apple history goes back decades. I bought one of the first Macs: a Mac 512K. Yep. 512K of memory, a 400K internal floppy, and a revolutionary way of using a personal computer. I loved it. I bought the stock. With my Mac I was able to write my graduate project and eventually receive my Masters in Aerospace and Ocean Engineering.
Despite the story line in Forrest Gump, AAPL was so volatile that the early years weren’t as stellar as other stocks like MSFT. I bought anyway. I was sure that a company which such an obviously superior design would ultimately rule the industry. But they didn’t grab much market share, the CEO was blamed, and Steve Jobs was kicked out of his own company. I was livid and sold my stock in protest. The stock promptly rose. I’d held my righteous ground though, and was happy enough with the returns I had in a few other places that I didn’t buy back in. Besides, from about 1987 to 1997, the stock barely moved and the company looked like it might not survive. I got out for ideological reasons, missed out on some gains, but was somewhat vindicated for about a decade. Then it started to climb, partly because of the internet bubble, but also because Steve Jobs was back. I watched for entertainment value, but was doing well enough in other stocks. It was a good time for AOL and such. A friend sold his AAPL when it hit $25. I remember thinking of him as a counter-indicator and that I should buy. I didn’t. AAPL closed at $545 on Friday. Its worth compared to countries is moot. Its worth compared to other stocks is astonishing.
If, if, if. A common investor lament. If I’d only held. That’s true for any investor that lives through such revolutionary times. It is also a common lament for Seattle residents. Everyone knows someone who bought MSFT, AMZN, IMNX, or SBUX early. I was lucky enough to have had MSFT and SBUX. Some did phenomenally well. Others never took the chance. I was also lucky enough to have FFIV. I bought it at various times, one time as low as about $3. It closed at $127. That’s why I am a fan of Long Term Buy and Hold (LTBH), an investment strategy that relies on proper positioning and patience. Ten years is a long time, but a forty-fold return (FFIV) can be worth it. Twenty five years is longer, but a 250-fold return (AAPL) is hard to ignore. (Really, AAPL was < $20 twenty five years ago.)
The only way that strategy works though is to be able to buy and hold. For most of those years I was able to do that because I had either a good income or a large enough portfolio that grew faster than I spent. I’m not in that situation now, but hope to return. Writing my book, Dream. Invest. Live., gave me confidence in my approach because it forced me to analyze years of my performance. Past performance is no guarantee of future performance, but as humans, that’s what we go on. The average time I hold a stock is more than three years. Lately that average has grown. There have been gains and losses, but over the years and decades, the gains outweighed the losses (page 233).
I feel less incentive to trade and recognize that one of my strengths is my patience – but I have to trade to pay my bills. I think that’s one of the reasons I’ve reacted more emotionally to my recent string of bad news. I’ve seen how powerful waiting can be, but I am being forced to act. I’m selling stocks far below my guesstimates of their value. Most of those stellar stocks went through similar doldrums. Like I said before, AAPL spent a decade going nowhere despite progress within the company. Unfortunately, waiting is not enough. The company has to succeed and survive. That’s hard to remember during depressed markets, and especially in stocks that lag a recovering market.
That’s why I am confident in Dendreon (DNDN), GigOptix (GGOX.OB), and Real Goods Solar (RSOL) for the long term. They are all making money in expanding industries, and their revenues are increasing. AMSC is in turmoil after their disputes with the Chinese. Maybe they’ll get back to work. I don’t know. Microvision (MVIS) and Geron (GERN) are some of my oldest holdings. They continue to creep towards making money, making profits, and revolutionizing the world; but cash flow and competition may be creeping faster. Undoubtedly, these are not the pre-eminent stocks out of the entire market. They are merely the ones that I thought were good enough, and I continue to think so despite doubts. No company or stock is perfect and I haven’t seen compelling alternatives. I’ll continue to hold as long as possible, sell when I must, and continue finding other sources of income. Give them enough time and ten-fold increases are possible. I’ve seen it happen. I wish I could wait.
I envy youth. They may have the time to wait. Warren Buffett suggests that houses and stocks are fairly cheap right now. I agree. Looking beyond fear and pessimism, I’d like to buy instead of sell, and have the time to wait.
For my own sake, I’d really appreciate sooner, instead of later, significant price appreciation within my portfolio, a windfall, an income that lets me build wealth while maintaining a prosperous life. I’m guessing that’s something my Polish mother (may she rest in peace) would be proud of – but she’d probably still want me to get a haircut, shave off the beard, and wear long pants more often. Who knows, maybe that could happen too?