By MoneyMorning.com.au
Have a good look at the charts below.
Stock A)
Stock B)
Both are technology stocks listed on the NASDAQ in the 1980s. And both companies saw their stock price dive more than a third in the dot-com crash.
If you owned these stocks, would you have thought about selling your shares during the 1990s, when the price doubled in value? You might have just been grateful to make some money back on a risky technology stock…
Imagine you decided to hold out for bigger gains. And finally, as a new century approached, the stock doubled… then tripled in value.
What do you do?
Cash in, or hang out a little longer?
If you had been holding stock A since 1991, the shares you bought would now be worth 402% more. Not bad too for decades of patiently sitting and waiting…
But if you’d hung onto stock B for the same amount of time, your stocks would be worth 5065% more today!
If you guessed that Stock B was Apple, you were right! You’re also probably one of the people The Age decided to write about yesterday.
As Apple shares went beyond $600 per share last week, the online rag interviewed some of America’s newest millionaires.
Oddly enough, most of the people interviewed didn’t buy the stock because of the business strategy, the fundamentals of the business, the industry, or even on technical analysis.
Nope, most people interviewed claimed they bought the company because they simply loved the product.
‘It had this little, tiny four by six screen and it was the coolest art tool I had ever seen,’ said one reader about her love affair with ‘Macs’. And it was her primary reason she bought shares in the company.
Another Apple lover bought shares only a few years after his dad came home with Apple’s first computer. ‘I just remember using Mac Paint and being really blown away,’ he said. To prove his loyalty, he held the Apple shares all the through the dot-com bust, too.
But the boom time could be over for these Apple devotees.
Just because the stock is up a gazillion per cent, doesn’t mean it always will be…
Google shareholders experienced the same sort of joy that Apple shareholders are now going through.
The chart above shows the Apple (red line) share price is seeing a similar trend to Google (blue line). In 2004, Google shares rose from their initial public offering price of USD$85, peaking at USD$747 three years later. Those holding Google shares would’ve been celebrating their impending financial freedom…
But the music stopped. The financial crisis saw 67% wiped from Google’s price by April 2009.
The thing is, Apple’s run up in share price has a striking resemblance to the one Google experienced. In roughly the same three-year period as Google, Apple’s share price has skyrocketed to all time high for the company. But most importantly, it’s the last three months of trading activity that Apple investors should be wary of.
Right now, Apple is enjoying an almost exact copy of Google’s 2007 straight-line rise…
For all the Apple fans hanging onto their $600 Apple shares, the question is… is it time to cash in, or hang out a little longer?
However, as an Aussie investor, chances are you don’t have any Apple stock to brag about. But you can learn a lesson from those Apple loyalists.
You see, Slipstream Trader editor, Murray Dawes, has a theory. If your trade has made some cash, perhaps it’s time to take some money off the table.
If you can, take off your original stake, so the rest of the trade is entirely risk free. That means, what’s left is just pure profit and your initial capital is safe. Or you can reinvest it into another stock.
Right now, Apple shareholders would be mad not to cash in… at least a little of their portfolio.
Huge triple-digit paper gains can disappear quicker than you can blink.
As an investor, you don’t want to see your paper gains erased just because you wanted to hold out for something bigger.
Because if you get greedy, you might be left with nothing.
Shae Smith
Editor, Money Morning
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