How The Apple Has Fallen: Asset Allocation Daily

Includes: AAPL
by: SA For FAs

Janus Henderson Investors: Information services and medical devices can do a better job of anchoring portfolios than consumer staples once did in volatile markets.

Jim Sloan offers advice on how to read institutional investment forecasts.

Thought For The Day: Investors should take note that Apple did not succumb to old age or sickliness, but plummeted at the very peak of its strength.

The New “Defensives”

“Both the information services and medical device stocks generally trade at a slight premium to consumer staples companies, but in our view, they have similar defensive characteristics, stronger competitive advantages and, ultimately, better growth prospects. If volatility persists, we believe investors may be in a better position holding these companies than consumer staples stocks.” (Janus Henderson Investors)

Investment Outlooks

“What kind of nitwit process gets one chief brokerage analyst to say 3000 for the S&P while another says 3100? Do those opinions make you any smarter? Oh, and they have Favored Sectors and Sectors To Avoid, with a large middle group of sectors landing on both lists. Pretty much everything is wrong about this approach, starting with the specious precision of the numbers and including the silly implication that forecasting is a sort of competitive game.” (Jim Sloan)

Distinguishing Signal From Noise

“There is great complexity in the signal and almost overwhelming noise obscuring it…; at turning points this is especially difficult to sort out. Lagging indicators tend to stay positive right into a recession…; this makes real time analysis using GDP, employment, and inflation data quite difficult, if not impossible. However, both leading indicators (e.g., housing, the yield curve, etc.) and balance sheet analytics…can give early warnings of impending recessions or financial crises.” (Kevin Wilson)


“Apple (NASDAQ:AAPL) shares have now fallen by 39.1% since Oct. 3, when the stock hit a 52-week high of $233.47 a share. With its market cap down to about $674B, its losses are larger than the individual values of 496 members of the S&P 500 - including Facebook (NASDAQ:FB) and JPMorgan (NYSE:JPM). The first to hit a one trillion dollar valuation, Apple now registers in fourth place in the market cap standings, behind Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Alphabet (GOOG, GOOGL).” (Wall Street Breakfast)

Thought For The Day

How the mighty have fallen. Apple, as Wall Street Breakfast reports (see quote above), went from a trillion-dollar market cap to $674 billion, having taken a particularly hard beating yesterday following a dim quarterly revenue outlook.

Investors have hopefully learned that Apple should not be counted among the things that last forever. Indeed, I addressed this concept (without naming Apple explicitly but including it implicitly) on Monday when I wrote:

"The day will come when Facebook and Amazon are seen in the same unflattering light [as GE and Sears…I’m just stating the obvious fact that market economies are more dynamic than the business model of any one company.”

To this idea, I will add one corollary that the falling Apple illustrated, namely that Apple did not succumb to old age or sickliness, but rather achieved losses greater than 496 of its S&P 500 colleagues at the very peak of its strength, after becoming first to attain 1 trillion-dollar market-cap status back in August.

Whether Apple recovers and the timing of that recovery are unknown. But Apple’s might and market prowess serve as an important reminder to investors not to place their faith in any specific companies but to spread their risks. Losses and missed opportunities come with the territory of investing. But since our goals generally remain, we need to learn to shake off these setbacks and get on with the job of building and constructing a portfolio whose durability can be founded upon diversification alone.

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