Stay Away from the Distortion Field [5:39m]: Play Now | Play in Popup | Download (639)

I started blogging about being an Apple Investor to journal my activities, with the hope that I might learn from both my mistakes and successes. I felt I was loosing the objectivity I needed, as I was becoming too emotionally attached to the stock. It took a long time for me to realize that the company and the stock are two very different things, and that they are tethered precariously through, fanaticism, media events, and earnings calls.

If you’re a long-term Apple fan, as I am (30 years), then you know what I mean. Like many others, I have embraced the Apple philosophy, the utility of simple and elegant designs, and come to expect that all Apple products just work. From that point, you come to expect that everything associated with Apple should be that way.

So why not the stock? How can the investing world be so blind, and not know what I know to be tacit knowledge, and not price the value of this stock appropriately? Besides having insanely great products and a fanatical following that is growing exponentially, they are debt free, and have more money than the GDP of most small countries. Apple, the company, is the epitome of quality, the archetype of what it means to be great. Shouldn’t that translate directly to the stock price?

The answer, unfortunately, is no. At this moment in time, fundamentals have no value. It all comes down to pure supply and demand. And unfortunately, with the tidal wave of hedge fund and 401K redemptions mounting, the demand is dwindling. There’s really no good reason to be in a stock like Apple, or any other discretionary products company, when the economy is going into the sewer.

I suppose a theoretical case can be made that a flight to quality companies might make a good investment strategy going forward. That is, buy only quality companies with no debt, lots of cash, and solid dividends. And there’s no doubt that Apple is a quality company, minus the dividends, but that doesn’t mean that its stock price won’t continue to deteriorate, nor the price of any other so-called quality company.

So, what’s an Apple investor to do? Get your head out of the sand, and realize that the problems we face right now are much bigger than Apple, and that the stock price will move with the market, not on its fundamentals. The unfortunate thing is that if the market appears to be heading for a retest of the November lows. And so, I would expect that Apple will do the same.

I could offer some tips for keeping the emotion out of your investing, but it really comes down to your commitment to your own personal education, and the level of discipline you’re willing to put in. There’s nothing wrong with sticking with a favorite stock, heck I do, that’s what this blog is all about. But it becomes a problem when you make decisions that go against the discipline, simply because you feel the need to stay invested with that stock.