A stock that has been in the media recently has been the US technology giant, Apple. It seems it is taking over our lives with most of us owning technology made by them or influenced by them in some way. They seem to make us want one of their products even without any specific need.
Last quarter, after selling more than 35 million iPhones and almost 12 million iPads, the company made profits of $11.6 billion.
To put that into perspective, in the same period Google’s quarterly turnover was ‘only’ $10.65 billion.
In July last year, Apple had more cash on its balance sheet that the US Treasury. Apple now has $110 billion in cash and announced earlier this year that they will be using $45 billion of this to pay a dividend to shareholders and buy back some stock over the next three years.
Apple’s share price today is around $550 and had passed the $600 dollar mark earlier this year. If you had been a savvy investor 20 years ago and predicted that a small electronic device called an ‘iPod’ would take over the world you could have made a lot of money.
Indeed if you were Mr Jobs you did. In January 1990 you could get your hands on a share for $8.50. The rise is even more remarkable considering that only ten years ago in May 2002 the shares were trading for $11.65! In January 2009 it was trading for $90.13. That’s an astounding increase of over 500 per cent in just three years.
However, according to fund manager David Jane, the market’s obsession with Apple is inflating the share price to an unsustainable level and he says that it is impossible for the company to meet expectations for much longer.
“This is the first time in the history of the US market that so much importance has been put on one stock,” he claimed.
“People are forced to own Apple because it is such a high proportion of the index. Even if they don’t like it then they own it underweight because of the risk of underperforming. That alone artificially inflates its value.”