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November 15, 2005
Knowing When To Go Long
Two weeks ago I pointed out the irony of a certain statement Michael Dell made eight years ago concerning Apple Computer. Asked after a 1997 speech what he'd do if he were in charge of Apple he said: "Shut the company down and give the money back to shareholders."
What I said, was that if you bought Apple and Dell two years ago you'd be happier with your Apple holdings than your Dell holdings, which was correct. Where I was incorrect was in saying that Dell beat Apple over that eight-year period.
It turns out the opposite is true: Apple beat Dell over the eight-year period too, as this chart shows. This proves what I had wanted to say originally but couldn't without the relevant chart to back it up: That if you went long on Apple on the same day that Dell maligned it with his infamous comment, you'd be pretty happy with your Apple holdings today. One notable investor certainly is. Find out who after the jump.
Buying Apple stock in 1997 would have required a lot of faith in a company that was trading at or near its historic lows. The Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud had that faith when he took a 5% stake in Apple in April of 1997, as BusinessWeek reported in the April 21, 1997 issue.
Alwaleed said at the time he had wanted to get into technology investments, and chose Apple from a list of 20 companies, which he narrowed down to 10 and then to four.
The Prince did pretty well. He bought 5% of Apple's outstanding stock on the open market for $115 million. In the intervening years he sold some of it, and now holds a stake accounting for 3% of Apple shares outstanding, worth about $1.5 billion.
In an interview with Bloomberg News last week, Alwaleed said he didn't expect Apple to rise much more, saying that all the benefits of the iPod and the work of CEO Steve Jobs have been factored into the price.
But making the kind of killing that the prince has requires a tremendous sense of timing. Going back to my comparison of Apple stock with Dell, I found that Dell beat Apple over the course of nine years and 10 years.
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I expect AAPL to go MUCH higher and here's why: 1)The Video iPod makes a lot of sense. I think it will be a bigger hit than the original iPod. 2) The "halo effect" has only barely kicked in. Remember, 95% of the computing public is still struggling with Windows and all its attendant misery.
Posted by: thomas Barta at November 15, 2005 04:50 PM
Feature-length movie content for your video iPod and the "Media Center" Mac Mini is already available, just check out http://www.4Flix.Net They have full movies for download (instead of just TV shows and music videos like iTunes), and the price is just $1.99 each. Plus they are DRM-Free, which allows them to be copied to other devices besides your iPod.
Posted by: AVCfan at January 1, 2006 08:56 PM