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Is Apple The Best Investment Ever?

aapl-v-tnh1

I had an email from a client asking me if their Apple stock was the best investment ever. That got me thinking and I remembered a conversation I had with Charlie Osborne, one of my investment officers at the bank, a couple weeks ago and he mentioned at that time that he’d just looked at a chart of Terra Nitrogen compared to Apple (I’ve posted it above).

You can see that TNH has performed very good compared to AAPL over the past 20 years (not quite a 4000% increase but 2750% increase is nothing to sneeze at) – just look at that rocket shoot in AAPL (the red line) compared the less rocket shoot like line from TNH, but they are currently to companies with strong performance records that shareholders want to own.

So, why are some stocks performing like this and others like this (see Procter and Gamble – the flatish green line):

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Sometimes its a catalyst internal to the company – like Apple’s innovative products – and sometimes its a catalyst outside the company – like Terra Nitrogen being the beneficiary of the shift in Ag demand from the third world’s move to more nutrient rich foods and Terra providing the nitrogen to grow more crops to satisfy that demand.

Companies like Procter and Gamble have relatively steady earnings since they produce products that consumers use everyday. They have no catalyst for explosive growth but they have a consistent level of demand which creates a fairly stable earnings stream. Which would you rather own?

Honestly, it depends upon your place in life. Sometimes you want to gamble on buying a company you anticipate to be innovative – Apple has always been innovative, but its just been the past 5 years that their performance began to beat PG. For 15 years, PG was ahead of the race. Sometimes you want a nice solid company that won’t ever hit a home run but that shouldn’t ever report performance so poor that it risks bankruptcy and driving your investment to zero.

Me, I’ve honestly never understood how to effectively buy the defensive stocks. My system is an earnings growth system – sometimes the market rewards earnings growth and sometimes it rewards earnings consistency. Ultimately, earnings growth wins out in the long-term – but as you can see from AAPL and TNH above, you sometimes have to have patience for the market to recognize the catalyst and reward the earnings growth.


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Mark