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Remember When Apple Shares Sold for $4?

By Rick Ackerman Posted on March 20, 2012, 4:28 am EDT Last Updated March 20, 2012, 2:18 pm EDT

Can anyone remember when Apple shares were trading for around four bucks? We can, because at the time, in 1997, we were so certain the company was headed for oblivion that we made it the subject of the weekly column we wrote for the Sunday San Francisco Examiner. Back then, it looked as though Apple had finally lost the battle for market share to Microsoft. This, despite the fact that Macs were superior to PCs in nearly every way save cost and, almost fatally, software development.  Even though Macs were the computer of choice outside of the workplace, and although students and users in creative fields were particularly loyal to the brand, by late 1997 Apple’s market share had slipped below 4 percent, down from 7 percent a year earlier. This placed the company eighth among U.S. computer manufacturers. “Think Different” was the company’s slogan then, but unless they did some out-of-the-box thinking themselves, there would be no future.

Fast forward to today. Amid a swell of hubris on the announcement of a $2.65 quarterly dividend and a $10 billion stock buy-back plan, Apple shares finally cracked $600.  A $5,000 investment in 1997 would be worth $750,000 today.  We should have realized the company was bottoming when we were deluged with hate mail in the days after the Examiner column ran. Hell hath no fury, evidently, like a Mac user scorned.  While our essays ordinarily elicited no more than three or four dozen responses, this time hundreds of letters and e-mails poured in.  The milder ones merely assailed us for being blind to the Mac’s many virtues.  But quite a few implied that we’d burn in hell, or worse, for merely doubting that Apple would survive. Who could doubt they would with so many hard-core fans ready to come to the company’s defense?

Bucking Mediocrity

It wasn’t just computer users who were willing to fight to keep the Sunnyvale firm alive. Software developers gave their all as well. We came to know one of them personally in our quest to find a trading platform that had all of the right features. This developer, with just a few employees, managed to keep Apple in the game until he was eventually outgunned by big companies with, collectively, thousands of employees. But the fact that he was able to offer a product that could compete in the major leagues of trading software, and to hang in there for several years, attested to the passion and dedication of all who have kept Apple’s flame burning.  The company’s market share now stands at around 11 percent but is likely to grow significantly as more software applications move into the cloud and away from the Windows operating system. Even at $600 a share, our advice would be to buy Apple and short the perennially clueless Microsoft. We should all wish Apple well, since the company has succeeded, and will likely continue to do so, by bucking a tide of mediocrity.

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  • Rick Ackerman March 21, 2012, 3:10 am

    So, E.M., what are you liking these days?

  • Easy Money March 21, 2012, 12:24 am

    Trying to guess the next few points is impossible and pointless; a waste of life/time. Finding a good company and investing like Peter Lynch has generally been the way to trade. I have owned 500 shares of AAPL since below $50 and will continue to invest in companies for years; not minutes or days or weeks. Find some good companies, invest heavily and then go live life away from the computer. slightly ironic in this case.

    • mario cavolo March 21, 2012, 8:05 am

      so easy easy money?….so if I had done that exactly ten years ago, the market is flat since then, not so easy…Only if I was lucky enough to choose the right handful of stocks, who has that foresight…? Pick the right handful of todays’ “tomorrow’s apple, etc. see which ones crash and burn and which ones might be stellar winners… I find Rich’s comment fascinating about Apple being able to correct all the way back down to $400 and still be regarded as in uptrend above the 200day ma…that tells me everything I need to know about how treacherous the markets and trying to pick stocks can be…I could easily end up buying Apple today and a year or two later be down 50% and I’m certain Rick would be trading that downtrend along the way, to be followed then back up on a steady uptrend all the way back up to Rich’s $800….I’m already nauseous…no easy answers easy money…

      Cheers, Mario

  • mava March 20, 2012, 9:44 pm

    As someone with IT background, having seen Windows, Macs and Linux, my view on Apple is exactly as pictured here:

    http://www.totalmania.net/wp-content/uploads/2008/05/the-mac.jpg

    Macs are very cute, indeed!

  • Rich March 20, 2012, 8:47 pm

    AAPL point and figure still targeting 819.

    AAPL may correct as low as the 408.26 200-day moving average and still remain in an uptrend.

    Re GDXJ, great minds think alike Rick.

    We have GDXJ a long term buy above the PnF target of 14.

    Precious metal miners are discounting deadly derivative default deflation and may be one of the first groups to recover after any market correction or crash…

  • Rich March 20, 2012, 8:39 pm

    Apple, which we supported in single digits since they gave us a computer and software for our Stanford students as part of their advertising marketing Educational Foundation campaign Steve Jobs dismantled in his fight with John Sculley, has another thing going for it:

    Although AAPL has AlGore on Board, Apple is not overtly part of the Google InQTel espionage establishment spying on Americans, abetting and aiding murders of American citizens and foreign leaders in violation of our Constitution:

    http://silversenator2012.blogspot.com/2012/03/stratfor-emails-google-behind-middle.html

  • Robert March 20, 2012, 8:20 pm

    I am about 2 seconds away from shorting the entire market and going on a 2 year vacation.

    • gary leibowitz March 20, 2012, 8:36 pm

      Go long using ETF’s that pay 3 to 1, go on vacation for 9 months, come back, short the market using ETF’s that pay 3 to 1, go on vacation permanently after that.

  • John Jay March 20, 2012, 8:07 pm

    AAPL will be paying a dividend.
    They have to burn up some of their illegal cash stash.
    I guess that letter I wrote to my Congress person got the job done.
    Ha! Ha! Ha!

  • observer March 20, 2012, 5:22 pm

    pass on apple

    someone gave me some itunes songs … thought I might poke around to see if they still had digital rights management or whatever … 30 minutes later I could not figure out if they had drm or could only be copied 5 times or whatever …. wtf?? sorry, I will never buy an apple product ever, let alone pay a premium price … running windows and slowly migrating towards linux

  • Mark Uzick March 20, 2012, 1:31 pm

    Cam & Mario, what do you guys think about long term, ITM, calls on Apple hedged by long term, ITM, puts on QQQ? The premise is that Apple will out-perform the index, either in an up or down market and that long term ITM options would have minimal time decay.

    • mario cavolo March 20, 2012, 5:16 pm

      ..hey Mark, that’s the kind of spread/hedging plays I admit I have not done….it seems to me they would much safer, but of course with more limited gains too…

      ….to what I know, there are many similar “spreads” that can be played which take advantage of relative strength and correlation, but without spending many hours to become familiar, taking such positions is perhaps unwise…though I am interested…

      Heck, we could take all kinds of correlated pairs to set up similar spread plays…I am also certain Rick has some sage advice on the subject…

      Cheers, Mario

  • PhotoRadarScam March 20, 2012, 7:01 am

    Hmmm. 1oz of gold or 3 shares of Apple?

    • Robert March 20, 2012, 8:17 pm

      That one is simple…

      AAPL is rising because iPad prices are falling (due to deflation, naturally) While Gold is falling because dollars are rising. More deflation.

      Meanwhile, oil is rising because of evil speculators, rather than rising because the EPA is closing refineries in the NE, and bonds are falling (yields rising) because iPads are getting cheaper in Iran, where oil is priced in Gold; but only until we attack them…. because it makes more sense to destroy Iran’s oil fields than it does to allow their oil to be priced in anything other than a foreign currency that does not even circulate in Iran…

      Follow me so far?

      buy AAPL- it’s the new Gold.

  • mario cavolo March 20, 2012, 5:52 am

    Hi Cam,

    …I don’t mean just with Apple stock, but with many different assets, I have played that game of calling tops and bottoms for short term spike plays, and gotten burned so many times I can’t count and want to cry or go postal… if I DO set a stop, the damn thing runs and stops me out, and then goes the right way without me on the train, if I DON”T set a stop it kills me….the options become worthless or if its in my forex account, the trade never comes back until after the position is already closed out….

    Indeed, my flaw is playing the positions too aggressively and I’m not saying other traders don’t play those trades successfully, but as a percentage, I doubt it is very many…

    Call me lousy at risk management, meanwhile, you go ahead and buy some Apple puts for both of us 🙂

    • gary leibowitz March 20, 2012, 3:03 pm

      Cam,

      Good call yesterday. Dollar is up, followed by a big drop in Gold, and futures market looks to be down.

      I think it’s oil that is most concerning. That has to come down for any sustained rally.

      I don’t expect any big drop in stocks, but a nice slow drawn out correction should be in the cards.

    • mario cavolo March 20, 2012, 5:26 pm

      Hi Gary! I do not mean my comment following in any way to be a criticism of Cam. I am just trying to observe and understand this idea of they “hey, pay on the back, that was a good call” thing , such as what you just wrote to Cam.

      I wonder the degree to which we are fooling ourselves on this kind of thing or not. A “good call” is more often than not, as I have seen it, random damn luck. Let’s look at the opposite of the “hey bro, good call”…thing. I can’t tell you how many 100% correct amazing money making calls I have made in the past two years, but I have lost money on every one of them because I was “wrong” on the timing by a range of as little as one minute to 3 days. I’m serious about this. I remember PERFECT calls where I set the position and went to bed, was BARELY stopped out within a 5 minute period on the chart before the call then went exactly perfect the way I expected including the target price to exit exactly the way I had set up the damn trade in the first place. Furthermore, this would be the case in other positions where I would otherwise be correct, but again, only 3 days later, far after I had already lost money/been stopped out in the position.

      So, when tomorrow or the next day, or next next Thursday, some moron had said “Apple will fall $10 THAT day, and it happens too, I find myself reticent to say “hey bro, nice call” because in fact, that guy is clueless just like the rest of us as to the time of day that asset will finally fall.

      I declare myself sane and aware on this matter…let anyone come along here and tell me I’m wrong but you better be able to explain why…just friendly musings…:)

      Cheers, Mario

    • gary leibowitz March 20, 2012, 7:39 pm

      Mario,

      Not to make too much of it. It was an end of day observation that the dollar was going to go higher. The natural assumption is commodities get hit. Equities had also been on a very long upward bias that it seemed logic the dollar would affect everything else the way it did.

      An excuse to correct.

      If this is anything like 1995 then we are in for a nice steady rise. That should also mean the dollar doesn’t get too high and allows for commodities to rise also.

      If there is any manipulation, I sure hope its concentrated on oil prices. The street is continually talking about China’s slowdown. Not sure if it will help our markets or not. I guess it depends on how much of a slowdown it is.

      I must apologize to Rick. My intentions were good but I have a habit of wording things that could easily be interpreted as an attack. We all have our Achilles heel. Words and phrasing is not my forte.

  • Bradley March 20, 2012, 5:48 am

    When a friend of mine told me that he was buying Apple at $20 per share in the early 2000’s (pre-split), and the only thing they were making were those HIDEOUS orange and blue bubble back computers, (this was just pre-ipod’s), my reaction was, “you’re buying a BOX MAKER?”
    Stupid me, as his small investment has turned into almost a million dollars, and that was after he sold half of what he had when the price was in the mid 100’s.
    Crazy, (like a fox).


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