Yesterday we had another Apple event.
This was the iPhone 15 event and it was focused on 2 main
products, the Apple Watch and the Apple Watch.
Ultra got a big upgrade, they got some designs, they got some
new bands and the next thing was the iPhone 15.
It got a whole new lineup with the iPhone 15 and the 15 Plus
and the 15 Pro and the 15 Pro Max.
Now, as always with these type of events, there's a lot of
opinions being shared. The iPhone looks the same.
This isn't innovation. It's the same design they had
last year. Apple had a cringy skit to try
to show how hard they're working on climate change initiatives
and carbon reduction. Throughout the entire event,
Apple never used the term AI or artificial intelligence a single
time. Is Apple an AI company, or are
they completely missing the mark here?
Tim Cook's pants don't fit well. They're all bunched up at the
feet. One of the opinions trending on
Twitter right now is that Apple is so uninnovative that they're
now more like Costco. They're not coming up with
anything new altogether. So what we're going to be doing
is looking at this event. I'll be doing a quick recap of
it and highlighting what I think is the most important way of
looking at this company from an investor's perspective.
And then on the subject of Apple and Apple stock in particular,
I'm going to be highlighting a specific Reddit post and
responding to this post. This is of an individual asking
for advice about Apple stock and this highlights the attitudes of
a lot of investors you're investing alongside.
And then finally, we got a report today that inflation
ticked upwards slightly. Now I've already made a video
saying that inflation is done and it's time to move on.
So I'll be responding to this data that inflation is moving up
slightly and what this can mean for the market.
Now let's go ahead and jump right in before we get to the
Apple event, I must mention for viewers that are new to the
channel or I don't have a history of watching my videos,
that I am a big investor in Apple and I'm not someone that
is just boarding the train right now.
I've been an Apple investor for a few years.
If we look at my current holding value, it's $50,700.
That's $21,699 in the green. So my first major buy of Apple
was right around there on the five year stock chart.
It was after the COVID recovery and I remember hearing a lot of
people saying at this point in time that this was a bad buy.
They're saying, Joseph, you're buying Apple at the peak, the
highest it's ever traded throughout all of history.
You're buying on the top, You're buying on the high.
But at the time, I thought that Apple was exploding in
popularity. COVID gave consumers a lot of
money to spend on devices. It was enhancing Apple's install
base, they were selling more services than ever, and they
were releasing new products that I thought a lot of people would
like. And on top of that, the
valuation for Apple was extremely undemanding.
The company was trading at a 19 Ford P/E ratio at the time.
So despite all the warnings that I was buying the stock on the
high, I didn't see any logical way of me losing money on the
company at that point in time. I thought the risk reward was
incredibly lopsided. To the upside, I bought apple in
two different time periods, one of them right here in this dip
and the other one right here in this dip.
That's the second group of buys I did in apple stock, The two
dips right around me. Now of course apple stock has
traded up quite a bit since then.
It's gone from the one 20s up to the one 70s.
Now currently the company's trading all the way up to 175,
but as you can see, it has a little downward pressure.
On a Green Day, apples down .65%.
While the rest of the markets in the green and apples had a
pretty tough month as well. The stock got all the way to a
high of 195 and now it's traded all the way back down to 176.
And the new Apple event doesn't seem to be helping the stock.
In fact, a lot of people have proclaimed that now is the
demise of Apple. The story is over, the thesis
has ended, and the evidence that Apple's lost its touch and it's
reached its top and it's all downhill from here is this
latest iPhone event, the iPhone 15.
So let's go ahead and just take a quick summary of what happened
in this event. Now, the event starts off with
this video and it doesn't really tell you what it is to begin
with. You just have to figure it out
as you go along. But I believe this was one of
the strongest points of the entire event.
It shows a group of families preparing for a birthday
celebration, all these different families in a montage, and the
event shows that each one of these families have the loved
ones that their lives were saved and extended because of Apple
devices. Tasha for example, had the Apple
Watch notify her of a low heart rate, she went to the hospital
to get it further checked and then she required a pacemaker
surgery. This is a life saving event and
Apple's highlighting this in a brilliant way.
I've said before that I believe Apple's becoming a healthcare
company. You can define healthcare in a
lot of ways, but I think that if you directly save people's lives
on a consistent and routine basis, then you're basically a
healthcare company at that point.
And Apple's proving that and highlighting some examples of
it. So this little montage I think
was one of the strongest points of the entire presentation.
And then we move on to the Chief Operating Officer where he
introduces the Apple Watch Nine. For the most part, it looks very
similar to every other Apple Watch, and that's a difficult
justification or rationalization for upgrading from one to the
other. If people are watching this and
you're wearing an Apple Watch that works just fine, you're
going to have a difficult time saying I need this new one.
Overall, the improvements are better transistors, better tech
behind it, the better screen, the better battery life, some
different things like that. But there was one really cool
feature that I think was a pretty unique innovation for
Apple, and for any company for that matter.
The feature is called double tap, and this is pretty
impressive. You put your index finger and
your thumb together twice and you can activate different
actions on the Apple Watch. Hi Deidre.
Hey Jeff, see you later. OK, bye.
Aside from iterative upgrades and new Apple Watch bands, this
is the only real change that I saw that was a major leap
forward in the technology of the Apple Watch, and I think this is
a pretty cool feature. If you want to do any type of
action Handsfree, you can simply just tap your fingers together
twice. Another thing that I thought was
interesting throughout this event is while every other
company seems eager to throw in the words a I and artificial
intelligence, Apple never does it.
Even when they're talking about the gyroscope, the
accelerometer, and they talk about the advanced modeling, the
machine learning that Apple Watch uses to have this gesture
work, They don't call it AI everywhere.
Where they talk about something that most companies would refer
to as artificial intelligence, Apple calls it machine learning.
But in technical terms, machine learning and artificial
intelligence are extremely similar, if not used
interchangeably. And in this case, machine
learning arguably describes what's going on with more
accuracy. Then we move on to the iPhone 15
Pro. The big news is that it's made
out of titanium. You can see the new design and
they highlight the differences in the qualities of material
hair. So we have overall a material
upgrade, which also makes it look a little bit different.
The biggest criticism at this point is that the design looks
the same as the previous year. They line it up and show the
different phones. And the big reaction here, I
believe from most people is that this is just another iPhone.
There's nothing super unique about it, and I think this is
the tough situation that Apple's in.
They've already had the phone get to a point where it's so
good and the design of it's so good that they don't want to
dramatically change it. Apple doesn't want to change it
to do a flip phone or a star shaped phone.
They're going to make their rectangular shaped phones.
For the most part, the design's going to look similar to every
previous design. The iterations, of course,
change from year to year. Apple upgraded the materials
it's made out of the screen that it's made out of the processor,
the battery, the charging port, the camera, and the software.
Almost every part of the phone is upgraded from the previous
year. It's objectively better, but
Even so, it still looks mostly the same.
So you look at the iPhone and you say that this is basically
the same as it was last year. So the Apple event overall felt
a little underwhelming. That is the most common word
used to describe it from investors that were observing
this event, and especially if you look on Twitter, a lot of
people are describing the vent as not only underwhelming, but a
bad sign for Apple. We have viral posts like this
from Frazad that says Apple is the perfect example of what
happens to companies that lose a sense of urgency and begin
prioritizing the bottom line to please investors.
They still make good stuff and they'll be around forever, but
the magic is completely gone. They're no different than
Costco. So Apple's now Costco and this
has hundreds of comments and 4000 likes.
And it's not just commentators on Twitter.
Wall Street also isn't excited quote We see a September event
as a modest negative for Apple given a lack of expected price
increases for the Pro model, features that lack compelling
motivation for consumers to upgrade, and modestly less
aggressive promotions from carriers.
Evercore ISI, analysts said, quote investors typically go
into this event with relatively low expectations given it has
been a long time since we've seen a major change in the
iPhone design or functionality. But investors were hoping to see
$100 bump to the cost of the Pro, which would have helped
offset any potential headwinds from Huawei's Mate 60 Pro
launch. So they kept their price target,
but they called September mildly disappointing.
Overall, aside from Dan Ives, most analysts weren't impressed.
They didn't move their price targets up.
They either moved them down or kept them the same.
So overall, investors believe the Apple event was
underwhelming, mildly disappointed.
Joining now my initial gut reaction as an investor in Apple
and someone that's done really well with this company in the
past is to say that you're all wrong and to go in and to start
nitpicking other people's arguments, to go into the
analysts and highlight where they got things wrong.
But instead I decided to consider their arguments.
What if they're right? What if Apple really is a washed
up company that's not coming out with anything revolutionary
anymore? What if that's right?
What if Apple is no different than Costco?
That's an interesting question. To me.
This was proposed as something negative for Apple.
Judging by the comments, 99% of the people that read this
thought this was a negative for Apple.
Now you know me, I'm a fan of Costco.
In My Portfolio under the consumer category, I only own
one company that's in retail. That company is Costco.
And I've talked glowingly about this company many times in the
past. In fact, I've spoken so boldly
about Costco, to call it the greatest company in the world,
and I said that non ironically. I think Costco is, if not the
best, one of the best companies in the world.
Costco's also a company that I've stood by my words.
I've invested in this company since the very beginning with
Apple since 2018 and have only ever added to this position.
Costco's now a $48,000 position, nearly as big as Apple with
$11,600 in gains. Costco's done so well over the
past five years that it's tripled the performance of the
SP500. So going back to the comparison
of Apple being quote, no different than Costco and the
magic being completely gone, this is used in more of an
insulting way for Apple. But to me this is actually a bit
of a positive. The fact that Apple is now being
accurately compared to one of the most reliable consumer
defensive companies in the world and one that has largely
outperformed the market for decade after decade with
incredibly resilient economics is a positive, not a negative.
And I think it's ironic that I consider Apple to be one of the
greatest companies in the world. And the people that are
criticizing Apple are now comparing it to another company
that I believe is one of the greatest companies in the world.
When we further consider the idea of Apple being like Costco,
it reminds me of another subject entirely that is the subject of
Warren Buffett's buy of Apple. Warren Buffett bought around $30
billion worth of Apple. The performance on that $30
billion has around 5X. It's been an incredible
outperformer and the best purchase that Buffet it has done
in his career over the past 20 years.
He doesn't consider this a timely trade.
He considers it partnering with a company that's now a part of
Berkshire. He is the largest holder of
Apple aside from Vanguard and BlackRock.
And here's what Buffett said about Apple in the most recent
Berkshire Hathaway meeting. They're good businesses and to
think that our criterion, our criteria for Apple is different
than the other businesses we own, it just happens to be.
A Better Business than any we own.
Buffett says Apple happens to be a Better Business than any other
business we own. That wasn't a misstep.
He didn't accidentally say that. He says that he's judging Apple
alongside every other investment he's ever made, and Apple is a
better company than the rest of them.
Buffett calling Apple a better company than any other one that
he owns is astounding when you consider the quality of company
in his portfolio. He holds companies like American
Express, Visa and MasterCard. He owns monopolistic duopolies
like Moody's Corporation. He owns energy companies that
have been around for decades. He owns Cocacola.
But Apple, according to Buffett, is better than the rest.
So there seems to be a massive disconnect here between Buffett
and most retail investors, at least the popular ones online.
Buffett saying that Apple's the best business of anyone that he
owns. He has it as 51% of his
portfolio and retail investors are saying that Apples at the
top and the company struggling. So why is Buffett so attracted
to Apple stock? Why does he like this company so
much? There's all the normal
fundamentals we could look at. Apple has a history of revenue
growth and free cash flow, massive positive economics, good
earnings growth over long periods of time.
It pays a growing dividend. It has a very strong balance
sheet. He loves the share buybacks.
We already know all of these great characteristics of Apple.
This is one of the most studied stocks in the world.
So I think there's something else that attracts Buffett to
Apple stock. Let's rewind time all the way
back to 1995. This is Berkshire Hathaway's
shareholder letter, and this was before Warren Buffett had any
idea of owning Apple stock. Again, 1995 is when this was
written. He owned Apple stock in 2016, so
over a decade later. But Even so, this has a lot of
the investing fundamentals and lessons that Warren Buffett's
trying to teach other investors. Buffett's highlighting the story
of RC Willey and the amazing success that is, and he has a
couple notes on the retailing business.
He says retailing is a tough business.
During my investment career, I've watched a large number of
retailers enjoy terrific growth and superb returns on equity for
a period and then suddenly nosedive often all the way into
bankruptcy. This shooting star phenomenon is
far more common in retailing than it is in manufacturing or
service businesses. In part this is because a
retailer must stay smart day after day.
Your competitor is always copying and then topping
whatever you do. Shoppers are meanwhile beckon in
every conceivable way To try a stream of new merchants in
retailing to coast is to fail. Now we get to the important part
here, quote. In contrast to this have to be
smart everyday business there is what I call have to be smart
once business. For example, if you were smart
enough to buy a network TV station very early in the game,
you could put in your shiftless and backwards nephew to run
things and the business would still do well for decades.
You do far better, of course, if you put in Tom Murphy, but you
could stay comfortably in the black without them.
For a retailer, hiring a nephew would be an express ticket to
bankruptcy. Ultimately, what Buffett does
here is he highlights two different types of companies.
There's ones where you have to be smart every day.
That's the type of business you run.
And then there's businesses where you have to be smart once.
When Buffett chooses between these two types of businesses,
he has a very, very strong preference for have to be smart
once businesses. Businesses where you can set
things into motion one time and then you can coast from there.
From there, it's gains and money and gains and money.
The interesting dichotomy between Warren Buffett and other
investors is most investors look for companies that require
constant change in innovation to continue their business.
Buffett does just the opposite. He actively seeks companies that
do not require constant change or innovation, with Apple being
his top holding. It matches well with many of the
criticisms that Apple's receiving.
The new iPhones look very similar to the iPhones last
year, the iPhones last year look very similar to the iPhones the
year prior and the iPhones the year prior to that, and the
iPhones before that and the iPhones before that.
Apple has done the same thing every single year for over a
decade now, and it all started with one brilliant innovation.
Steve Jobs revealing the iPhone. One the first iPhone.
This was true innovation. Steve Jobs revolutionized the
world by renewing the way that we looked at consumer technology
in general, completely changing the way we looked at phones and
technology and computers altogether.
And this is arguably the most important product innovation of
all time. But since then, Apple hasn't
done nearly as much. It's basically just been the
same thing year after year. But despite the fact that
Apple's done the same thing basically every year for 20
years now, their profits and their market have expanded
dramatically out, pacing the rest of the market as a whole.
Apple has essentially turned into a have to be smart once
business. The one time they were smart was
with the iPhone. One every other iteration of
that is a spawn off of the iPhone 1 success.
That was the single greatest innovation Apple's ever done,
and nearly all of their economic gains can be attributed to that
single innovation. Apple's not a business that has
to be smart every single day. In fact, Apple can act foolishly
in a lot of different ways and still have a pretty good
business. So while most investors are
fixated on what the latest feature is or the latest specs
of the latest camera, I believe Buffett is more inclined to
focus on the predictability of the company.
If Apple can continue to come out with the relatively same
product and simple iterative upgrades, but continue to
generate the type of economics they have historically, that is
a very good business. So overall, when I look at
Apple, I agree with Buffett and investing in companies that are
have to be smart once companies, companies that can invent the
iPhone one time and then derive gains from it for 2030 and 40
years in the future. Making that one critical
decision and then creating a Moat around it is what Apple's
done and this company should derive gains and economic
benefit for decades to come. Now moving on, I wanted to
highlight this Reddit post because I think this really
shows the quality of investor you find on different investing
forms like Reddit. We have here the post title.
I bought Apple at its height and I now regret it.
This individual says I bought Apple stock at $195.60 per share
this year. Literally one minute after I
bought it, it crashed back to around 184.
Now it's 176 and I don't know what to do.
The bulk of my active portfolio is Apple.
My salary is very low and it takes me a while to save up
$4000. Tim Cook just permanently
destroyed $500 plus of my hard earned salary.
Even if Apple rises back up again, the likelihood it will
rise significantly above $200.00 is really rare and it will
probably take two plus years. Remember I bought 18 shares of
Apple at $195.60. Should I just cut my losses?
I should just sell all my apple and use it to buy the QQQ or
something else? That's the post.
Now since this individual is asking publicly for advice on
this, I'm going to give advice directly.
The best advice I would give is to simply sell out of your
individual stocks and buy an ETF.
Buy an ETF and dollar cost average into it and give up the
idea of doing individual investments.
Individual stock picking can be extremely rewarding.
It can be fun, it can be a passion, and you can also
outperform the market if you're wise.
If you're shrewd and you have the right temperament for
picking individual companies, which is clearly something that
this investor has illustrated that they're not capable of, at
least not yet. Buying Apple stock at the
absolute peak after a run up of 45% year to date, and then
complaining when the stock has a slight pullback, That is a giant
red flag that you're not ready to hold individual companies.
The next big red flag is that you're outwardly blaming Tim
Cook for your own mismanagement of stocks.
Not only are you complaining in the short term that the stock
went down, but you're directly blaming Tim Cook that you lost
$500.00 of your salary. Tim Cook, who is possibly one of
the best CEO's in the world and has 10X Apple stock since his
CEO tenure crushing the market, Tim Cook has nothing to
apologize to you for. Tim Cook knows what he's doing,
and you have no clue what you're doing.
Blaming the CEO of a company is a massive red flag, especially
when you're blaming one as good as Tim Cook.
The next thing that's perplexing about this comment is the fact
that you argue in the second paragraph the Apple stock can't
realistically go above $200.00 per share.
Well, just a couple months ago you bought the stock at 195.
Did you buy the stock at 195 believing that it couldn't go
above $200.00 per share? And if not, why did you buy the
stock? The only reason that you would
buy an individual stock is if you see substantial upside.
So you paid 195 for it, but now that it's gone down to 176, you
don't believe it can go above $200.00 per share.
What changed? What thesis changed over the
past two months? Was it this Apple event?
Was it substantially different than you predicted?
I think the only thing that has changed is the price.
The stock moved down a little bit, so now you're second
guessing your thesis. Investing in individual stocks
like Apple requires being anchored to the fundamentals, to
the valuation, to the longterm growth prospects of the company,
not to the volatility and price movements day-to-day.
If you allow yourself to be anchored by price movements,
you're going to have no clue what to do if the stock goes
down even a small percentage like you are with this post.
So my advice for this individual or anyone else that finds
themself in this situation it is to simply give up stock picking
and buy an ETF. If you're blaming CEO's, if
you're trading based on shortterm sentiment, if you have
no anchoring to fundamentals, then it's time to buy an ETF and
forget about stock picking. Because if you make decisions
this way you're going to lose a lot of money.
And the last thing I'd like to point out with this post is
whenever you see studies of the average investors returns, this
is the type of investor that's included in those averages.
If you do have the right temperament and the right
strategy, investing in individual stocks, you can have
very good outcomes. Now, we also received the
inflation report today and inflation was a bit above
expectations. They mostly attribute this to
increased gasoline prices. Now I came out with a video a
while back saying that inflation's done, that the
subject is basically over and we're moving on from it.
By that, I don't mean that inflation is never going to tick
up slightly in the future. I think the battle of getting it
below 4% and 3% down to 2% is going to be an ongoing battle.
Some months it will go up slightly, some months it will go
down. But by inflation being done, it
means that no longer is it the driving narrative of the stock
market. Inflation used to be the thing
that dictated stock prices. It was a number one thing that
every investor looked at. And now the storyline has
shifted. Inflation has gone down enough
that most investors have moved past this narrative.
This is evidenced by the fact that even though inflation was
up slightly, the markets are still up today.
In the next meeting, the Federal Reserve is going to keep the
interest rates the same and then they'll say how they're still
focused on inflation and they'll be watching the data closely.
But as of right now, I think that inflation has moved from
the top of mind, subject down somewhere towards the bottom.
It's no longer the driving narrative behind the market.
Now that's going to be it for this episode.
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I can't believe it.