With a market value of $563 billion (as of March 20), Apple is the most highly-valued corporation in the world. It has made quite a few millionaires out of smart investors, and a group of investors gathered in Los Angeles last week to talk strategy about making money off the Apple juggernaut. Really, it's not a hard strategy due to the way Apple conducts itself. The company does not split its stock, and up until this past week, it never issued a dividend. The strategy for making money on Apple was simple: buy and hold, and don't panic on the dips, that's the time to buy more. There. That was easy. But of course, there's more to it than that, which is why EconomicTiming.com’s Jason Schwarz hosted this first annual show, taking up two large rooms in the cavernous Los Angeles Convention Center. The gathering of speakers was impressive and worth price of admission. Most everyone in this audience was an Apple investor and was simply holding on to their shares and watching it go up up up. But there were some great takeaways from the event that even casual gadget aficionados could learn from. Here's what we heard from the speakers.
Fortune's Philip Elmer-DeWitt has covered Apple for years and gave a talk on why Wall Street analysts keep coming up short on Apple earnings. He had a number of theories, one of which gave a clue how analysts work. Most analysts publish their estimates for the coming quarter the day after the company reports the numbers from the last quarter. However, over the next three months of the quarter, sales figures will come in that may alter their projections, but they don't change their original projection. They never update their projections as the quarter goes on, even though they know their original projection is way off. It could also be they are sharing that info with their best clients, keeping the information for themselves.
Elmer-DeWitt noted that companies who spend all their time listening to their customers the most and constantly making changes to meet customer needs invariably get taken over from a company from below that starts badly but improves sufficiently. "Apple is a serial disruptor, starting with one industry after another," he said. It upset the mainframe, PC, portable MP3, smartphone, and tablet markets by ignoring what people wanted while those companies were busy listening to what customers wanted. Steve Jobs liked to quote Henry Ford as saying "If I asked people what they wanted, it would be for a faster horse" to justify Apple's refusal to do market research. One market after another, Apple has come along and upset the way things are done by never once asking anyone for their input.
Companies tend to militantly protect their own market and certainly resist any change that comes along that might erode that market. Apple owes its existence to this. Steve Wozniak was an HP engineer when he and Jobs created the Apple computer and Woz offered it to his employer repeatedly, only to be turned down five times.
Using the analogy of hockey great Wayne Gretzky, who always said to skate where the puck is going, now where it is, Elmer-DeWitt said "Apple is one of those rare companies willing and even eager to cannibalizes its own products." The iPhone and iPad are both eating the iPod market, while the iPad is eating the PC market alive and Apple isn't worried about it.
Getting back to his talk on Apple analysts, Elmer-DeWitt noted that the best analysts who follow the company's earnings are independent. He ranked Alexis Cabot, an independent investor on the Mac Observer's Apple Finance Board as the most accurate Apple watcher out there. Cabot is used to work for Regis McKenna and GE Capital but now lives in Rome and follows Apple for a living. In a ranking of analysts by accuracy, the best large firm was JP Morgan, and it came in at #16.
Keeping with his distrust of the pros, Elmer-DeWitt called out a number of independent analysts that you should follow if you really want to know what's going on with Apple due to their track record for accuracy:
Turley Muller, Financial Alchemist blog (http://financial-alchemist.blogspot.com/)
Andy Zaky, Bullish Cross blog (http://bullishcross.com/)
Daniel Tello, deagol's AAPL model (http://aaplmodel.blogspot.com/)
Elmer-DeWitt pulled no punches on Edward Zabitsky of ACI Research: "He deserves a special place in analyst hell. He issues the most boneheaded numbers and worst possible advice. "Case in point: On January 25, Zabitsky sent out a letter to clients to short Apple stock (meaning, bet on it going down), saying it would sell to $250. At the time, it was trading at $450 a share. Now it's playing with $600.
Investor advice is a tricky thing, especially with a company that has such a passionate (and occasionally unhinged) user base. Here are Elmer-DeWitt's favorite troll-free places for getting sane Apple advice:
LinkedIn's AAPL Independent Analysts board
Asymco.com and 5by5.com weekly podcasts