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Apple of our eye

Apple Inc. has ascended into a rarefied realm where few other companies go. Disregard the fact that they have some of the most rabid and loyal fan followings on the planet. Disregard the fact that they make some of the most lust-worthy gadgets on the planet. And disregard the fact that several other tech companies have deemed to follow their lead in an“if you can’t beat ‘em, join ‘em” effort. Just take into consideration this one fact to understand just how much clout Apple holds; recently, their shares soared past the $300 per share price for the first time in the Cupertino giant’s history. That means it is now officially in the big leagues and in the pantheon of high-priced stocks everyone wishes they had in their portfolio.

Think of the luminaries that keep them company, and the names will roll off like a who’s who of the corporate world; Google, Mastercard, Goldman Sachs are just a few of the names that can be mentioned, and it has Berkshire-Hathaway for good company in this A-grade listing, but it’s safe to say that Apple’s share price will not match Berkshire-Hathaway’s $125,000 per share any time soon. But what is undeniable is that Apple has enjoyed an era of such unprecedented success under Steve Jobs that their position as one of the, if not the, preeminent tech company of our time is indisputable. In his second innings now since taking over from Gil Amelio, Jobs has powered Apple to widespread commercial success and acclaim, and a lot of that has to come down to the restructuring Jobs initiated more than a decade ago. But where does Apple go from here in a financial sense?

Apple share priceHigher priced stocks are subject to a different dynamic when compared to lower-priced stocks. For one, the average shareholder is now no longer able to hold any meaningful stake in the company. Yes, mutual funds and exchange traded funds might give the average Joe the chance to hold a small stake, but it will be very small, almost negligible in fact. Take Google, 80% of whose shares are held by institutions while that figure stands at 70% for Apple. Even a monolith such as Citigroup has only 38% of their shares owned by institutions, but their market cap is barely 50% that of Apple and their shares trade at $4, so that lends even more credence to our argument.

Indeed, it is a matter of pride for Apple to be soaring so high, but is there sense in keeping the value so high as to price out the average retail investor? Perhaps there isn’t, because these stockholders might bring a lot of volatility to the table with things such as day trading and short-term investing, something institutional investors are loathe towards doing. Warren Buffett, for one, has stated how he prefers investors who are in it for the long haul and there is on the face of it no merit in the argument for splitting the stock and allowing day traders in. Stability is a blessing in these volatile economic times as opposed to letting speculators into the mix.

However, that is not to preclude the possibility of a stock split at all. It is highly likely that the powers that be at Apple are mulling over the possibility of a stock split since the value of intrinsically solid companies, such as Apple and Google, will always keep on rising as opposed to dropping over time. Google too has not engineered a stock split of late, but there is no compelling reason for these two tech titans to avoid doing so. These two companies have the collective imagination of the public captured, and it would be hard to believe that if Apple were to split their stock there wouldn’t be a frenzied interest in it. There is a recent precedent for a split too, Baidu having done so on the NASDAQ earlier this year in May. Whichever way you look at it, Apple is no longer the forbidden fruit of the tech world. Everyone wants a bit of it.

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One Response to “Apple of our eye”

One Comment

  1. p90x says:

    Apple is definitely something I would have wanted to invest in many years ago, I will just keep working on that time machine and get back to you. But serious I enjoyed reading, thanks for sharing.

    - Robert

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