Imprinted on the cover of The Hitchhiker’s Guide to the Galaxy – the fictional “standard repository for all knowledge and wisdom” in the comedic sci-fi series of the same name by Douglas Adams – is the phrase “Don’t Panic.”
Arthur C. Clarke, a British science-fiction author even more renowned than Adams, called it the “best advice” that could be given to humanity.
He was right.
That’s why the same sentiment is behind Rule No. 2 of our five-part investing system, which says to “Separate the signal from the noise.”
And I hope you followed that rule back in the summer of 2015, when it seemed like all of Wall Street and Silicon Valley were panicked over Apple Inc. (Nasdaq: AAPL).
At the time, the so-called “experts” said the sun was about to set on the world’s most valuable tech franchise – and fled its stock in droves.
However, if you followed along here and put into action our tech wealth-building strategies when it came to Apple, then you’re sitting on some huge gains.
If you’re new around here, you can do the same thing.
Entirely Like a Huge Fortune
As someone who’s followed Apple for more than 30 years, I was stunned by the number of analysts and investors alike who shunned the Silicon Valley legend a few years back.
But if you’d been following along with me here, you wouldn’t have been surprised last week when Apple reported record sales.
And you would have already picked up shares at a discount…
Apple’s big rebound proves the power of two of the key investing themes here at Strategic Tech Investor.
And today, I’m going to show you just how to combine these two tools so you, too, can rack up consistent market-crushing gains…
Now then, you should probably know that I am still considered one of the biggest Apple bulls around. Indeed, I got quite a bit of notoriety back in early 2014 when I became the first analyst to predict that Apple shares would go to $1,000.
I put that price tag on before the stock split 7-to-1 in June 2014 for an adjusted price of $142.85. My target date was Labor Day 2016.
How did I do?
The stock got within $8.31 of my forecast on April 28, 2015, before then selling off.
Yes, my ego took a slight hit. However, I stand by my price target, though it will clearly take Apple longer to get there than I first thought.
I believe much of the “delay” we’re seeing is because of Wall Street’s “noise.” One analyst after another opined that, under CEO Tim Cook, Apple is no longer an innovative firm.
To make that statement shows a lack of knowledge about Apple’s history. Let’s start how the firm turned the world on its ear in 1984 with the Mac.
The first truly consumer-friendly personal computer was a great self-contained platform that didn’t need any extra programming and featured the breakthrough mouse. However, it is important to note that Steve Jobs “borrowed” much of the ideas for the iconic device from the famed Palo Alto Research Center (PARC) run by Xerox Corp. (NYSE: XRX).
Jobs was later forced out of the company. Then, when he returned in late 1996 to chart its revival, Apple was on the ropes. But it took him five years to come up with the “next big thing” – the iPod digital music player that debuted in October 2001.
In other words, Apple didn’t break much new ground for 17 years. And the iPod was not the first portable digital music player. That claim belongs to the MPMan F10, a device that South Korea’s Saehan Information System Inc. launched in March 1998.
Apple is credited with creating the smartphone when it debuted the iPhone in June 2007. Again, it was not the first phone of its kind, but it was by far the “best-of-breed” and became the standard by which all wireless devices would be judged.
Are you sensing a pattern here?
Apple is rarely first to market.
Instead, the company has a genius for taking existing technology and then refining it and redesigning it into useful, intuitive, and fun products that get consumers to line up to buy one.
Keep Your Towel Handy
In the Adams Hitchhiker mythos, those who “Don’t Panic” are said to “know where one’s towel is.”
That is, people who don’t panic – those who are in control of just about every situation – always know where their towel is. They don’t have to worry about the big stuff because they’ve already taken care of the small stuff.
So, if you always know where your towel is – if you’ve focused on “the signal” and turned off “the noise” – you’d have seen that Apple has been quietly adding new revenue streams that most other tech companies can only dream about.
It’s also a cash machine that is rewarding investors with a 2.2% dividend and billions in share buybacks.
For a while there, the Apple bears looked smart – on paper at least. After all, the firm had three quarters in a row of falling sales, a rare event for this leader.
But last week, the embattled giant bounced right back. Sales of the iPhone jumped 5% from the year-ago period, helping the firm rack up record quarterly sales of $78.4 billion.
Not only that, but Apple’s high-margin Services unit saw an 18% sales jump to $7.2 billion. That’s more than three times the sales that all of Netflix Inc. (Nasdaq: NFLX) had over the same stretch.
Yes, profits were off 2.6%, but this occurs as Cook is ramping R&D spending up fourfold as he invests in the next round of breakouts.
Here’s where all these crucial facts come to play. Had you ignored the noise on Wall Street, you’d have seen what I saw – that Apple’s share-price decline was nothing short of a great buying opportunity.
Rounding Up Profits
And as I said before, this “case study” also shows why my Cowboy Split buying system is so profitable.
It’s a classic investment strategy with a new nickname to reflect our focus on the “New West” of Silicon Valley tech stocks.
Properly employed, the Cowboy Split will protect you from volatile markets.
Here’s how it works. We buy a first tranche at market and then put in a lowball limit order to buy more shares when they correct, generally after the stock is down 20%.
In other words, what for Wall Street would be a 20% stop-loss becomes a 20% discount for us.
Had you put my Cowboy Split into place when Apple peaked at $132.65 on a closing basis on April 27, 2015, your lowball would have triggered at $106 almost exactly four months later.
The good news is that, after falling a bit further, the stock has come roaring back as Wall Street regained its senses.
Since it hit a closing low of $90.34 on May 12, 2016, Apple has surged 42.9%. By contrast, the S&P 500 Index is up 11.3% over the same period.
That means a stock Wall Street hated less than two years ago smashed the broad market’s returns during the period by an amazing 280%.
That’s why we follow along here and through my paid services – to learn the tips and strategies that will put us far ahead of the pack.
To learn how to make companies like Apple part of your tech-centric wealth machine.
So we all thank Douglas Adams for his immortal advice – and I thank you for meeting me here twice each week.
I’ll see you again on Friday.
Have a great week.
- Strategic Tech Investor Special Report: Your Tech Wealth Blueprint.
- Strategic Tech Investor Special Report: The “Cowboy Split.”
- Strategic Tech Investor Video: Why Apple Stock Will Hit $1,000 in Two Years.
- Strategic Tech Investor: This May Be Your “Last, Best” Chance to Buy Apple at a Bargain.