Microsoft, Apple And The Unbearable Wrongness Of Assumptions

by: Marek Fuchs

Questions and assumptions can kill, especially when it comes to flashy product stocks like Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF).

Whenever traders clap their eyes on a favored company's glitzy new product, they immediately start asking precisely what it will mean for the stock. They assume success or failure of the product and stick to that assumption, even though initial assumptions about product success (especially in a field as fickle as technology) often prove thunderously wrong.

We're seeing questions and assumptions-and assumptive questions all over the place lately:

"What does Surface mean for Microsoft's future - and stock?"

"Can Samsung's Galaxy S III Dethrone the iPhone?"

Don't act on any of it. That doesn't mean you have to give it a plaintive shrug and move on, but it's nearly impossible to play a new product on a hunch. Even those at the Surface launch announcement, for example, hardly got their hands on the product. How do they know how good it is? How do you know?

Never buy or sell the stock on such ill-informed guesswork.

Wait, watch, track numbers. My initial impression of the iPhone? Overrated. I thought Apple was in a low margin field with a device that had too many gimmicks for its own good. It didn't take too long, though, to see that error of my errant ways. Instinct can be flawed; numbers are true.

Many felt Windows phones would prove a saving grace for Nokia (NYSE:NOK), but numbers were not bearing that out. Now it's self-evident. The Barnes & Noble (NYSE:BKS) Nook received praise from those who felt it had the promise to save the troubled bookseller. Recent numbers seem to point in another direction.

It seems almost trivial to say so, but considering how often traders make mistakes, it bears reminding: don't be lulled by your initial instinct about a product and its ability to save-or savage-a stock. In the end, you stand a good chance of being badly mistaking.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.