Hello and welcome to another edition of Stock Market Saturday here on MorganLinton.com. For those keeping score you probably noticed I missed last Saturday, and honestly, I have no good excuse, I just completely forgot. Remembered this week, so let’s get to it!
One of the stocks that has been on my radar for a while now is Apple. I’ve owned Apple several times in my life and it was actually one of the stocks I owned as a teenager. If I had just held onto it from them until now, holy moly that would have been one heck of a win. It’s also a good reminder that holding onto good companies for a long time is something you probably won’t regret.
I personally don’t see Apple going anywhere but up over the next 10-20 years, and since that’s the time horizon I invest for, I see this as a very low risk investment. That being said, I’m trying to decide whether to buy before or Apple executes their split which was confirmed on Thursday and will happen at the end of the month.
Now at a high level, buying before or after the split doesn’t matter because you’re not getting Apple stock at a 25% discount, you’re getting it technically at the same value before the split. That being said, there’s a bit of psychology that goes into a split – when people see the share price in the hundreds, they see it as a way to get into Apple at a lower price.
This perception could cause investors to flood into Apple and the stock price to jump by say 10% – 20% the day of the split. Yes, over a 10-20 year period it won’t really matter that much but personally, I’d rather enjoy that little bump and get in earlier.
Of course, from a theoretical standpoint, it shouldn’t matter when you buy Apple shares in relation to a stock split. The split itself has no intrinsic impact on the company whatsoever. After the split, you’ll own four times as many shares worth roughly one-quarter the price of the pre-split stock.
Nevertheless, investors in most stocks react favorably to news of an impending stock split. Implicit in a company’s decision to do a split is the idea that the business is on a firm footing and likely to hang onto the share-price gains it’s earned in the past. Moreover, most splits come after a protracted period of strong performance, so a split announcement adds to existing upward momentum.(Source – Motley Fool)
Now I know what you’re going to say…”but Morgan, the stock already jumped last week when they confirmed the split, and it’s already built into the price of the stock so you’re being foolish.” To that I say, “I still think more people are going to buy the stock after the split, they’re going to see it as a more affordable way to own a piece of Apple, and the day of the split, you aren’t going to be able to time the jump, but if you get in now you do get to benefit from it.”
Of course as all of you know, I’m not a professional stock market investor, I’m no guru, and you could even say I have no idea what I’m talking about because I really know very little about all the dynamics at play here. All I have is my opinion and some things I’ve gleaned from a handful of articles I’ve read.
Like all of my stock investments, the money I’m putting in isn’t money I need for the next 10-20 years so if I buy Apple next week and it goes down by 50% for the next three years (which we all know is pretty much impossible, but hey, anything can happen!) I’ll be okay, as long as it comes back up at some point.
More than anything I like Apple as a company, I use pretty much every product they make from a Macbook to an iPhone, iPad and Apple TV, and I’m pretty excited about what they’re working on in the AR Glasses space that I think is going to be a game-changer over the next decade.
I also love how much cash Apple is sitting on and how much opportunity for growth their is ahead for them in so many different categories from new hardware like the AR Glasses I mentioned above to cloud hosting and storage that they’re still very under-indexed in.
As some of you know, I am very bullish on AR, I think that in the somewhat near future we will see all the screens we know and love today, from our laptop screen to our phone screen to our TV screen replaced by augmented reality, and in some cases virtual reality. I gave a talk at TedX in Rome about this, if you haven’t seen it yet feel free to give it a watch below.
When it comes to leading our fundamental shift from screens to augmented reality, I think Apple is likely going to be one of the key players. Over the next 10-20 years I think the moves they will be making with this alone will make them an even bigger rocket ship they are today. Which is why, split or no split, buying before or after, over the time horizon I’m looking at I feel like this will be an investment I’ll be glad to have made.
Okay, well that’s my two cents, I’m planning to buy Apple probably on Monday or Tuesday and will ride the split and beyond. What do you think? I want to hear from you, comment and let your voice be heard!