Archives for May 2012

Apple vs. Microsoft – The Tale of Two Techs

In a February 7, 2012 interview, Henry Blodget of the Business Insider was quoted as saying:

Apple’s iPhone business alone is now bigger than Microsoft.  Not Windows.  Not Office.  Microsoft.  Think about that.  The iPhone did not exist five years ago.  And now it’s bigger than a company that, 15 years ago, was dragged into court and threatened with forcible break-up because it had amassed an unassailable and unthinkably profitable monopoly…  In the December quarter, Apple’s iPhone business generated $24.4 billion of revenue.  Microsoft’s whole company, meanwhile, from Windows to Office to servers to XBox, generated $20.9 billion.

A quick look at a 5 year chart comparing the stock price of Apple (AAPL) vs. Microsoft (MSFT) reveals the tale of two techs.  One going nowhere, the other shooting to the moon.

Now, some decry the fact that AAPL share price has been taking a beating lately, but it isn’t hard to discern that overall, the company has a solid brand, solid financial position, and a bright future ahead.

FULL DISCLOSURE:  We are long AAPL at the time of this writing.

FULL PERSONAL DISCLOSURE:  I recently purchased an iPad 3rd generation and am undergoing positive life-change as a result.

Please pass the Bud Light, and Make It Platinum

Driving into work this morning, I noticed a new billboard had gone up advertising the new Bud Light Platinum.  The sign had a picture of the bottle with the words “Every Night Has Potential” plastered across it.  I couldn’t help but think that when it comes to your investments, “Every Day Has Potential”.  Pretty catchy huh.

Many investors will try to time the market and get in when things are heading up, and getting out when they’re going down.  The problem with that idea is that trying to time the market will rarely work in your favor.  The stock market is a compounding machine.  Over the long-term, companies produce products which you buy and they derive a profit from so-doing.  These profits are called “earnings” and are either passed to the stock-holder via dividends or they are reinvested into the business for it to decide to produce cooler and better products which you buy…and the process is repeated.  Over time, stock prices rise, dividends compound, earnings accelerate, and your wealth increases.

A few years back, I went to a Due Diligence Conference hosted by Davis Advisors where they showed the following chart (updated through 2011).

As you can see, trying to time the market can be quite dangerous.  If an investor, let’s call him Bud, would have stayed the course from 1992-2011, he would have experienced an 7.8% annualized gain.  However, if he would have decided to try to time the market, and ended up missing the 10 best days during that timeframe, his return would have only been 4.1%.  If Bud would have been even more scared (probably listening to too much CNBC I would imagine), withdrew all his money from the market, and missed the 90 best days in that 20 year span, he would have ended up with a -9.7% annualized loss.

Bottom line, stay the course.  Every day has potential.

The Joy of the Journey

The other day I was listening to a leadership podcast where John Maxwell, a best selling author and influential leadership coach, was being interviewed.  A portion of his interview that stuck out to me was his thoughts on our journey in life, business, parenting, or ________ (fill in the blank).  He stated that most of us suffer from Destination Disease, always looking ahead to when we finally ‘arrive’.  While its certainly not wrong to have future goals and strive for them, he cautioned us not to miss the Joy of the Journey.  It’s stepping back, right now, where you are…and being thankful.

In today’s culture, it’s always about the next best thing, rising to the top, being the best.  These are not bad items in and of themselves, they are what drive us forward, they’re what make businesses profit, they’re what excite us.  However, if we strive so hard for the ‘arrival point’ that we miss the tremendous blessing of the journey to get there, we rob ourselves of the joy of life today, the joy of our business today, the joy of our children today…

Bottom line, don’t get caught with Destination Disease.  Rather, step back and find the Joy of the Journey.  For me, as a Partner of an Investment Management firm, it is easy to get caught up in the volitility of the markets and future goals for growth of our firm.  But today, right now, I’m reminded of the joy it is to serve a loyal group of clients as we navigate the markets and journey together toward successfully managing their investments.