We have no plans to sell now, but there will come a time…
In the last 3 1/2 years Apple shares are up 740% as the chart below illustrates. The second chart shows what happened to the largest holding at Dock Street in the late 1990’s: Cisco advanced 751% in 3 1/2 years.
We, and you, are very happy we own Apple stock and we are pleased that our decisions over the years to overweight Apple have turned out so well. However, the charts above remind us that nothing is forever in the stock market and with Cisco still down 64% from the end of 1999, we know that someday we will need to sell some, if not all, of Apple.
We expect to own Apple for many more years, but the current frenzy over the iPhone 5 and the expected debut of the iPad Mini in October, might create a real melt-up in the stock. Expectations for the Christmas selling season should be very high.
Add to that the reluctance of shareholders to pay taxes on the gains so late in the year and the result might be a large move up in November and December.
I realize I’m warning you about a very positive development, but when stocks rise too quickly the risks increase as the opportunity diminishes. We should not forget that in 2008 Apple fell 54% as sales and profits continued to grow—and back then Apple was a much smaller position in our portfolios.
Of course, the stock could go nowhere for the remainder of the year because investors just can’t bring themselves to pay $700 plus for Apple.
We’ll take what comes, but we thought you should know that selling some Apple is not beyond our imagination even though we continue to believe the company is performing as well as any business ever has.
Daniel A. Ogden
Disclosure: Dock Street Asset Management, Inc. and our clients may own securities. This article is not intended to be used as investment advice.