Forever Stock: Can You Handle It Tim Cook?
If you’re new to the blog, please read Steve Jobs Resigns: Why I Hated Apple to understand my struggles with Apple. I sang a familiar tune as I zigged when I should’ve zagged. Last year, I finally threw up the white flag. I surrendered to peer pressure, upgraded to an iPhone 5, and foolishly abandoned my stock sell discipline. I carved out a section of my retirement portfolio, bought some Apple stock, caved to Motley Fool, and classified it as my “forever stock”. I thought holding on to a stock forever was a simple concept. But more than a year later, I learned some valuable lessons.
Don’t Be Late To The Party
From 2007 to 2012, Apple stock was the place to be. If you bought AAPL on the debut of the iPhone, June 29, 2007 at $119.47 (adjusted), your investment would have ballooned almost six fold ($705.07) a little over five years later. Five years is almost a lifetime in this new Internet age. I got complacent and lazy. I recall thinking, ok finally I’m on board the Steve Jobs train. Let the good times roll! iPhone 6, 7, ,8, AAPL $600, $700, $1000. I sounded like LeBron James after the Decision. We saw how that worked out. Fierce competition ate Apple’s monopolistic market share while dropping their stock price over 40% from their all time highs. Ouch. The cliche is true. If everyone is already in the party, there will be no more buyers left and the only thing left to do is sell.
Sell Disciplines Protect Your Downside
I was successfully using a 8% sell rule on all my stock purchases. Sadly, my selective memory focused on all the money I left on the table when my stocks moved higher after I sold. I also convinced myself that Apple would never feel an 8% drop and I wanted to correct all my previous Apple misses. Boy was I wrong. Funny how we see what we want to see. I should have recalled Mark Cuban dumping his Facebook shares after their IPO tanked. Now my once forever stock is down over 40% while the S&P is up over 10% for the year.
Holding On Is Not A Sign Of Strength
In reality, holding on after taking a bad beat is not a sign of strength. It is a sign of weakness, laziness, and stubbornness. Every bad drop in AAPL, I rebutted with “It’s not that bad. Things will turn around soon. Take it like a man.” I looked for any excuse for a possible turnaround. Apple bonds, iRadio, iOS 7, Blackberry tanking, etc. Don’t ignore the facts because numbers don’t lie. Logically speaking, isn’t a stock fundamentally broken if it is down over 40% from its high?
I am still long on Apple. But I vow never to repeat these mistakes again. I will never buy a stock that’s run up too high and too long. In the future, if I miss the boat, no need to chase because other opportunities are always around the corner. I will never buy a stock without an additional sell order. I’m a very emotional person and need a system to cut losses to prevent bigger damage. Finally, I will drop my dangerous notion that holding on is a sign of strength. Due to my low self confidence I desperately grabbed at anything that resembles inner strength (threshold for pain). I now recognize that I was getting exponentially weaker while my stock was getting pummeled. Thank you Tim Cook for my great smartphone and some valuable lessons in the stock market.
Do you believe in forever stocks? Why or why not?