“This column isn’t investment advice,” wrote Colin Barr Friday under a headline (“Why It’s Time To Dump Apple“) that could have fooled me.
Why is Colin Barr telling Apple investors to sell their shares?
Simple. Because Apple is the world’s most valuable company, and other companies that once held that title—IBM, Microsoft, Oracle, AT&T, for example—have since come back to earth. Writes Barr:
The S&P 500-listed company with the largest market value has steadily lagged behind the broader index over the past 45 years, accumulating a deficit of more than 8,000 percentage points, according to data compiled by Ned Davis Research Inc.
OK. Let’s put that to the test for Apple. We don’t have 45 years of Apple history, but we do have 41. If you’d sold Apple shortly after it went public in 1976 you would have missed out on a 7,000% gain. Not good.
A fairer test of Barr’s advice would be look at the effect of dumping Apple in 2011, when it first topped the most-valuable-company list. Not quite as bad, but bad advice nonetheless:
What if you’d sold Apple Friday morning, when Barr’s column appeared in the Journal? Even that was a loser.
Barr’s advice turns out to be bad no matter what time period you choose. One year, three years, 10 years, max.
Where did Barr go wrong? You have to read nearly to the end of his piece to get to the counter-thesis:
Analysts continue to expect Apple shares to soar, and why not. The firm’s revenue outlook for its fourth quarter was stronger than expected, thanks in part to the coming unveiling of the 10th anniversary iPhone. Despite posting a healthy 14% annual return since 2012, Apple shares still trade at a discount to market earnings multiples.
That’s right. Apple may be the S&P’s most valuable company, but it still cheaper than the rest. Does that sound like a reason to sell?