Apple soared yesterday, other stocks too, so where's Newton in all of this
By Dian Vujovich
If you’d bought Apple when it was trading around $7 a share in the 1990’s and sold it yesterday at $318, you’d be one lucky and happy investor. After all, holding a stock for a long time and knowing when to sell it once you’ve made a profit is trickier than knowing which companies to buy.
There are a number of stocks that have had a heck of a run during the last 52-weeks. Zagg, a little company with the stock symbol that’s the same as its name, and that makes plastic covers for iPhones is one of them. It has been as low as $1.90 and traded as high as $8.04 over the past year. Then there’s Crocs (CROX), which has nothing to do with Apple except that I’d bet a lot of Apple lovers are Crocs wearers. I love them, wear them and also sure wish I’d bought the stock when it was trading at its 52-week low of $4.33 a share because yesterday it closed at $14.08. But would I have held it that long? Hummm.
Hindsight is more than 20-20 when it comes to making money in the market. If, for instance, I’d purchased Apple at say under $10 a share, and did so a number of years ago, how likely would I have been to hold on to it until now? Honestly, not very. A stock that’s price goes up 50 percent is considered a good return. One that moves ahead three, four or five times, makes investors ecstatic. But from $10 to $300? Come on. Who would have ever imagined that run? Or, the two 2-for-1 stock splits during the course of it?
And here’s where Newton’s First Law of Motion comes in. Which, if you ask an academic, would probably tell you has absolutely nothing to do with the stock market. Then again, Wall Streeter’s always say that there’s no stopping a raging bull—until something happens to stop it.
Lest you’ve forgotten, Newton’s First Law of Motion is: An object at rest will remain at rest unless acted on by an unbalanced force. An object in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force.
So the big question for all Apple stock holders, or anyone else with investments that have gone up 50, 100, 500, or 3000 percent –whether they’re portfolio managers who’ve got the stock in their funds or individuals— is: What’s the force that can stop Apple’s stock from rising to say $345 a share, as some predict it will. Or, your 50 or 100 percent gain from going up to 200 or more? Or, any of them falling by 100 or 200 percent?
Something awful happening to the company’s corporate culture could. Competition could. Product problems could. Low sales and growth could. A disgruntled investor fan base could. Unfavorable market commentary could.
On a broader scale, all equities would suffer if there were a country catastrophe of some sort or another economic disaster.
So in an attempt to see the market better, if I were to ask Newton to identify what an “unbalanced force” was, he’d probably say that would be impossible because what’s ahead is never known and can’t be identified until after it happens.
At the time of this posting, Apple was trading at around $306. That’s down over 11 bucks from yesterday’s close. Wonder if there’s an unbalanced force in the works?
To read more articles, please visit the column archive.