Apple is a stock investors want to love, but it is a stock that could cost investors dearly in the future. It is somewhat surprising that a 35 percent drop in a tech giant is spurring excitement among individual investors. It seems that hope is a powerful driver of decisions and investors are hoping this time is different.
Less than 15 years ago, it looked as if Microsoft, Intel and Cisco would dominate their industries for decades. Microsoft has been the kindest of the three to investors and is only 50 percent below its all-time highs, while the other two are off more than 70 percent.
Bulls argue that Apple has new products on the horizon. Excitement is building about Apple’s possible production of a watch, which ignores the reality that less than one in five Americans now wears a watch according to investment banker Piper Jaffray & Co.
Web TV is another possible business for Apple that intrigues some investors, despite the fact that few seem to really understand what this technology would offer consumers.
Wall Street analysts have dropped their earnings estimates on Apple for the current quarter and for the full year. Analysts have still been overly optimistic lately — the company has missed estimates in two of the last three quarters.
A decade from now, it is very likely that Apple will still be a great company, but that does not make it a great investment. Buying Apple now is similar to trying to catch a falling knife. You might grab it by the handle and amaze your friends with your skill at knife catching. But you are more likely to grab the blade and be left nursing a wound.
With thousands of other stocks that have brighter prospects, it could pay to ignore Apple and buy stocks that are going up instead of down.
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