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Don’t Be So Obvious
An investing theme developed this week as we put together The Juice.
Sometimes the things we take for granted as obvious aren’t what they seem.
For example, on Thursday we countered something investors rarely, if ever, think twice about. One company reports bad earnings, so Wall Street punishes the entire sector. To this end, we questioned Airbnb falling in response to Hilton’s weak guidance. While you might get a read on Marriott using Hilton, you can’t do likewise for Airbnb. The company’s strong earnings supported our conviction to resist the seemingly obvious.
This Story Will Make You Think Twice
You know those signs you sometimes see on the freeway? The ones that flash how many traffic fatalities there have been in the year. You would not be crazy to simply accept that these reminders make things safer.
However, fresh research in the journal Science says not so fast.
Researchers conducted an experiment in Texas. They found these signs actually increase traffic accidents, particularly because they distract drivers and elevate anxiety.
Scroll with us, as The Juice applies this general logic to a stock that screams buying opportunity as investors take it down alongside the general market.
Apple Is 100% Absolutely Doing The Right Thing
Investors trashed pretty much everything on Thursday. They rocked the major indices, sending the Dow, S&P 500, and Nasdaq down 3.1%, 3.6%, and 5%, respectively. They also took it to some of our favorite individual stocks.
Airbnb (ABNB) gave back its earnings pop and then some, falling 8.4% on Thursday alone. One of our favorite ecosystem plays, Starbucks (SBUX) was down 5.1%. Our top ecosystem play, Apple (AAPL), took a 5.6% hit.
No Stock Is Safe In This Environment
When the market tanks like it has so far this year, it makes sense that pretty much every stock appears to go down. This pain represents general market sentiment and investors moving out of stocks. They’re taking risk off the table. So, in this environment, our Hilton versus Airbnb comparison doesn’t apply.
However, if you’re able to ignore the noise and focus on a company’s long-term narrative, you can scoop up some serious bargains during times like these.
There’s More Happening With Apple Than Broad Market Pressure
As usual, there’s a debate over Apple.
Here’s the quick version of what’s happening.
Some investors – actually it’s probably more like a handful of eager journalists – have trotted out the tired Apple has lost its soul argument.
They claim Apple isn’t the company Steve Jobs made famous. And Apple only went further off track when design lead Jony Ive departed. Tim Cook, according to these critics, isn’t running Apple the way Jobs or Ive would. His strategy of emphasizing Services over Products (devices) won’t work, primarily because it abandons Apple’s long standing hardware mystique.
It seems obvious, if not sane and logical, to think Apple should go all-in on device innovation. It is, so the story goes, what brought the company to the dance.
We Call Bull
These critics love to channel Steve Jobs. Super romantic, nostalgic, and all, but also shows a lack of understanding of who Jobs was and what Apple is today.
As we discussed earlier this week in The Spill, inside the numbers, Apple’s as strong as ever. The same applies strategically.
When Steve Jobs unveiled the iPhone, he realized, unlike BlackBerry at the time, that apps, not web surfing, represented the future. There might not be a more embarrassing quote in tech history than former BlackBerry CEO Jim Balsille chiding Apple in 2010 by saying, you don’t need an app for the web.
Steve Jobs was (obviously) right. Balsille was woefully wrong.
20-Plus Years Ago Jobs Started Implementing Apple’s Services Vision
Each time Jobs did one of those presentations Apple critics say they miss, he did more than unveil the next big thing. He showed us how we can use our devices – usually via apps – to get things done. Whether we want to work, get creative, or be entertained, there is an app for that. And our iPhones and iPads act as mere conduits for what was the next phase of personal, mobile computing.
Now, we’re smack dab in the middle of the future Jobs created.
We have reached peak technology from a hardware standpoint. We don’t need our devices to be any more innovative. We’re saturated in tech. Too many more bells and whistles on our devices would be overkill.
We like them just the way they are. They’ve never been more useful.
Steve Jobs would have seen this. He would have realized there wasn’t much more device innovation necessary. And just as he saw the future with apps, he would have seen the future with Services. The way Tim Cook is today.
Jobs would have evolved, something Tim Cook’s critics appear hesitant, if not unable to do.
Jobs would have used Services to make the hardware we’re all satisfied with more useful. He would have placed focus on Services – the segment that’s growing faster than any other element of Apple’s ecosystem – and used them to keep the device upgrade cycle alive and, most importantly, the ecosystem stickier than ever.
The Bottom Line: Some Apple followers want to preserve the company in wax. They want Apple to be what it was in 2010.
Here’s what they miss – Steve Jobs would not have allowed such stagnation. In fact, he’d be proud of what Tim Cook is doing at Apple today. He most certainly would be executing a similar, if not the very same Services-focused strategy.
A thinner iPhone with another fancy lens on the back will not maintain Apple’s position as a leader in tech. Rather, providing more ways for us to use our devices – in all aspects of life – will get the job done.
Use the broad market carnage and Apple-specific concerns we’re seeing today to build your position in a stock that will form the foundation of quite a few long-term portfolios tomorrow and beyond.
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