| WASHINGTON, April 11
WASHINGTON, April 11 By various accounts, Apple
Inc. is now bigger than Spain, Portugal and Greece
(combined), or the entire retail sector of the U.S. economy, or
13 Warren Buffetts. What are we to think about that?
First, a disclosure. In my two-person household are three
Apple laptops, two Apple desktops, two iPhones, one iPod, two
healthy iTunes accounts, a fair amount of iPad lust, and 200
shares of Apple stock, purchased by my husband roughly two
decades ago, and making up a large share of his retirement
He would have had 400 shares, but - as he frequently
reminds me - I talked him into selling 100 shares (pre-split)
back when it was selling for an eye-popping $65 a share, a price
I thought was frighteningly high. It is selling today for about
$628 a share.
So, (1) No sane person would take buy or sell advice from
me; and (2) I have a vested interest in everyone plowing more
and more into this company until it's worth more than every
other company put together, or I can convince my husband to sell
more. However, that isn't the point of this column.
Rather, it's to offer some perspective on this gorilla of
Wall Street and the people who own it. And to warn individual
investors that, even if they don't live in an iCult ashram like
mine, they may own Apple stock.
That's because the most commonly held mutual funds have been
plowing cash into Apple, and when a company gets that big, it
can dominate even a diversified mutual fund portfolio.
And so, a few points to consider.
- You may already be an Apple shareholder, according to data
compiled by Lipper, a Thomson Reuters company. For example: Do
you own PowerShares QQQ Trust, Series 1? That's an
exchange-traded fund that is sold as an inexpensive proxy for
the whole of Nasdaq. As of March 31, Apple made up 17.5 percent
of that fund; so, if you had $20,000 in that ETF, you were
sitting on $3,500 of Apple stock. Of course, since then, Apple
has gained about 3 percent, while most other stocks have fallen.
Other popular funds that hold a lot of Apple are Fidelity
Contrafund (ironic, right?), with 9.46 percent of its
March 31 portfolio in Apple; Vanguard Growth Index
Fund, with 6.13 percent; and Fidelity Growth Company
Fund, with 7.9 percent of the portfolio. And if you own
the whole market, as proxied by the Vanguard Total Stock Market
Index Fund? On March 31, $26.80 of every $100 you had
in the fund was in Apple.
- Institutions dominate the stock, holding 69.1 percent of
all Apple shares, according to Nasdaq data as of the end of
March. Big pension funds, investment companies and more are all
invested in Apple. More than half of the 1,848 institutions
which claim to own Apple bought even more shares in the first
Apple pessimists say the fact that everybody seems to own
the stock is a good argument for selling it. Lest we forget, in
1999, Microsoft reached a $619 billion market capitalization,
and it's now worth a shade less than $255 billion. The
once-popular bull market Wall Street adage holds, "Trees don't
grow to the sky." At its 1999 peak, Microsoft was selling at
$58.38 a share; a year later, its share price was $21.69 (and
today, it's at about $30.36).
- Some people still think the company is reasonably priced.
At 12.5 times estimated forward earnings, Apple is roughly in
line with the NASDAQ and cheaper than the Dow Jones Industrials,
which sports a forward PE of ro ughly 14.25 now. Indeed, Apple
could keep on rising. At least two analysts - Piper Jaffray's
Gene Munster and Brian White of Topeka Capital Markets - are
predicting a $1,000 share price for the company.
- But naysayers have a point, too. They look at the death of
Steve Jobs, the problematic labor conditions in China where most
Apple equipment is made, the antitrust lawsuit filed against
Apple and others by the Justice Department claiming collusion on
e-book prices, increased competition from other smartphones,
tablets and streaming video services, and say the company's
easiest earnings days are behind it.
- Don't forget the dividend. Apple recently said it would
pay shareholders $2.65 a share each quarter just to hang on to
its stock. That's roughly 1.6 percent a year, and almost four
times the average yield on 6-month certificates of deposit now,
according to Bankrate.com figures. Of course, if all of those
mutual funds, ETFs, pension funds and my husband decide they've
had enough of Apple, you may wish you had your cash in the bank