Mar 7, 2015
The replacement of venerable AT&T (T) for Apple (AAPL) in the Dow 30 Industrial Average is noteworthy on many levels.
The Wall Street Journal reported: “Apple Replaces AT&T, Boosts Index’s Weighting Toward Tech Stocks”
But is Apple really a Tech stock or a Consumer Discretionary Industry stock? Will Wall Street still be calling Apple a Tech stock after they start selling watches and automobiles?
Life moves on. When American Telephone & Telegraph was formed in 1879 with the invention of the telephone, it was telegraph and horse riders carrying the nation’s communications. There was not even a national telephone service in the United States until 1915. AT&T joined the Dow Industrials Average a year later.
By next week, I think only four of the Dow 30 were in the index when I was born.
In terms of the differences between the stocks entering and exiting the DJIA this month, AAPL is more volatile and has a greater beta. In good times and in bad, that means AAPL out-performs on the up-side and the down-side.
http://finviz.com/screener.ashx?v=151&t=T,AAPL
The AAPL stock is also up +70% over the past year and +30% over the past half-year.
http://stockcharts.com/freecharts/gallery.html?aapl
This is incredible performance for a company that now has a market cap of US $737.4 billion, and almost certainly not to be repeated until after the end of the next Bear market.
http://finviz.com/screener.ashx?v=141&t=T,AAPL
I suspect that during the next Bear, however, the down-side for AAPL will also be remarkable. The stock probably will lose more market cap than exists today in total for T, which happens to be US$173.8 billion. Even at that, the fundamentals will still be impressive.
What will change during an advanced Bear cycle is that you will be the recipient of negative story after negative story about Apple. Count on it.
There will be worries that their new products suck, that their old ones have declining sales, that key managers have departed, that manufacturing sources and/or distribution channels are in disarray, that government committees are investigating offshore cash hoards or anti-trust, and so forth.
But don’t be misled. That is when the big guys are buying, and regrettably when you will be selling.
Today the media stories are glowing and the big guys are selling and you are buying.
This phenomenon never ceases to amaze me.
Surprising is the statement this week of one of the three Apple co-founders, Ronald Wayne, that: “I’ve never owned an Apple product. Someone gave me an iPad a few years back, but my son needed to teach me how to use it”.
But I’ll bet you he was a long-time subscriber to AT&T.
I’m in the same boat as Ronald Wayne in terms of my ability to use their products. Armed with iMac, iPhone and iPad, there are pre-teens today – most of those from the ages of 8 and 12 I’d say – who could teach me how to use these products properly. In fact I can’t even get my Apple access codes to work!
So, except for FaceTime and the photos I take on the iPad, I still prefer my PC desktop, laptop and notebook. And while I no longer have a flip-top phone, Pat does.
Until tomorrow…
/Bill