Admit it. When you first saw the title of this post, you probably thought, “What is this guy thinking?” Who would even consider selling one of the most successful and admired companies in the world?
Writing this wasn’t easy. Watching Apple stock (AAPL) soar above $600, which is about $50 more than what I sold it for, left me questioning my decision. But isn’t that the challenge with investing? Our imagination takes over. If we sell and the stock goes up, we regret it. If it goes down, we feel victorious.
So, what was wrong with Apple? Absolutely nothing! The company is performing outstandingly, breaking records, surpassing analysts’ predictions, and exceeding their own reputation. Apple even started paying a dividend, something I had hoped would happen but began to doubt. Analysts are also very optimistic. According to CNN Money, the 44 analysts offering 12-month price forecasts for Apple have a median target of $635, with estimates ranging from $500 to $750. This median represents a 4.79% increase from a recent price of $605.96. In one speculative article, it was even suggested that the stock would need to rise to $1,368 to make a share buyback worthwhile for Apple.
Believe me, if the price ever drops, I’d consider buying shares again after reassessing its financial health.
Letting go of a high-performing stock can mess with your emotions. It’s not often you hold onto something making you lots of money and think, “Time to get rid of this.” But that’s how investing works. “Buy low, sell high” isn’t just a saying. Warren Buffett wisely advises, “Be fearful when others are greedy, and be greedy when others are fearful.” These are logical ways to secure earnings. I could have held onto the stock and speculated forever about its price. Maybe it will hit $750, or maybe it will fall to $200. No one knows.
But a capital gain is real. Buying at a lower price and selling at a higher one locks in profit.
Here’s why I decided to sell:
1. Apple surpassed my sell-point.
When I bought Apple at $333, I heard a report predicting it might reach $500 within a year. I laughed and thought, “Okay, if it hits $500, I’ll sell,” thinking $500 would be enough for a new iPad. Setting a sell-point, regardless of method, is important. A 50% return is something to be proud of. The challenge is sticking to your plan. When Apple rose above $500 to $510, then $530, greed kicked in. I wondered how high it could go and for how long. Don’t fall for this. Timing the market is not advisable, but taking advantage of opportunities is. When a stock hits your sell-point, lock in those earnings!
2. The price was rising too quickly.
Apple crossed $400 in December 2011 and $500 just three months later. By the time I sold, it had soared over 30% in 2012. When a stock continually trades at its 52-week high and rises rapidly, something’s up. It could be the company, the market, or just hype. Thinking this streak could continue indefinitely is naïve. Take opportunities as you see them.
3. The Android threat.
I initially chose Apple for its leadership under Steve Jobs. At that time, the iPad 2 was new, and there were rumors about the iPhone 5. The last project Steve Jobs worked on was the iPad. Though Apple products are cool, the iPhone and iPad face fierce competition from cheaper alternatives, like the $200 Amazon Kindle. Android phones are also gaining market share. While Apple has a promising future, time will reveal if it can maintain its post-Steve Jobs expectations. Although Apple’s decision to pay dividends is commendable, it might signal a shift from its past decade’s approach.
The bottom line is that we can’t time the markets or predict our investments perfectly. Despite the difficulty, I was happy to secure a 64% return in 8 months from Apple. Logical investing is nothing new, but it takes practice. I’ll view this as a learning experience and apply it to future opportunities.
