Apple – Not Saying Goodbye

I’ve written more articles about Apple than any other company we’ve ever owned. If I were to lie on Dr. Freud’s couch, then you’d find there were two Vitaliys writing these articles. First, there was Vitaliy the contrarian. Despite Apple’s ginormous size and the several dozen Wall Street analysts following the company, I felt it was misunderstood by investors. Wall Street rarely looked beyond the next quarter or two. Investors always drew parallels between Apple and Nokia/Blackberry, expecting the iPhone to eventually follow their path into oblivion.

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This was the theme of my earlier articles on Apple: Look past the next year or two; Apple is not Nokia; the iPhone is software in a hardware package, and thus there is a recurrence of revenue that is underappreciated. (Nokia with its Blackberry did not have the brand relationship nor the recurrence.)

And then there was Vitaliy the geek, who – I am almost embarrassed to admit – has owned every iPhone (except 8: I skipped to X). I cannot remember a single company I ever owned that elicited such a strong emotional response from me, both as a stock and as a maker of great products.

But lately my articles about Apple have been of a different kind: bittersweet goodbye letters to the stock. I became disillusioned with Tim Cook’s efforts to create a new category of products (Apple failed at building a car), and the stock price has appreciated to the point where the valuation demands that I have to a clearer crystal ball about Apple’s future than I possess.

I get a feeling I am not saying final goodbyes. Investors’ relationships with Apple are somewhat binary – it’s either love or hate; there is no middle ground. Today Apple is loved. At some point in the future that will not be the case.

So, how does one invest in this overvalued market? Our strategy is spelled out in this fairly lengthy article.

Vitaliy Katsenelson is chief investment officer at Investment Management Associates in Denver, Colo, which has a position in both Apple and Micron Technology. He is the author of “Active Value Investing” (Wiley) and “The Little Book of Sideways Markets” (Wiley). Read more on Katsenelson’s Contrarian Edge blog.


Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley) and The Little Book of Sideways Markets (Wiley).

His books were translated into eight languages. Forbes Magazine called him "The new Benjamin Graham". To receive Vitaliy’s future articles by email or read his articles click here.




About the Author

VitalyKatsenelson
I was born and raised in Murmansk, Russia (the home for Russia’s northern navy fleet, think Tom Clancy’s Red October). I immigrated to the US from Russia in 1991 with all my family – my three brothers, my father, and my stepmother. (Here is a link to a more detailed story of how my family emigrated from Russia.) My professional career is easily described in one sentence: I invest, I educate, I write, and I could not dream of doing anything else. Here is a slightly more detailed curriculum vitae: I am Chief Investment Officer at Investment Management Associates, Inc (IMA), a value investment firm based in Denver, Colorado. After I received my graduate and undergraduate degrees in finance (cum laude, but who cares) from the University of Colorado at Denver, and finished my CFA designation (three years of my life that are a vague recollection at this point), I wanted to keep learning. I figured the best way to learn is to teach. At first I taught an undergraduate class at the University of Colorado at Denver and later a graduate investment class at the same university that I designed based on my day job. Currently I am on sabbatical from teaching for a while. I found that the university classroom was not big enough for me, so I started writing and, let’s be honest, I needed to let my genetically embedded Russian sarcasm out. I’ve written articles for the Financial Times, Barron’s, BusinessWeek, Christian Science Monitor, New York Post, Institutional Investor … and the list goes on. I was profiled in Barron’s, and have been interviewed by Value Investor Insight, Welling@Weeden, BusinessWeek, BNN, CNBC, and countless radio shows. Finally, my biggest achievement – well actually second biggest; I count quitting smoking in 1992 as the biggest – I’ve authored the Little Book of Sideways Markets (Wiley, 2010) and Active Value Investing (Wiley, 2007).