I started running my own SIPP around one year ago, put 70% of the funds in an accumulating 100% Equity Index Tracker, and bet the rest of various US high technology stocks. So far, quite happy with overall progress. Just waiting for the recent split in Google shares to work through, but i’m beating 10% returns overall, which is tremendous.
The one bizarre one is Apple. I bought 30 shares at $523.47 (cost of around £9,593) and they are, after a year, sitting at a 1.43% loss – £137.09 overall – not big, but not showing signs of progressing either. That despite hoovering up over 70% of the mobile phone industry profits worldwide, and having an iPhone business that in itself is bigger than virtually every other company in the world. 2013 revenues of $170.91Bn.
The stock market seems to think Apple will no longer be able to continue it’s last 5 year bottom line compound annual growth rate of 39%, so are treating it as a slow and steady cash generative company, rather than one whose growth rate will continue undiminished. A Price/Earnings multiple of 13x, way lower than that of Google (30x) and that of Amazon (580x) – both of which have given me healthy returns.
Long Memory sometimes helps
My one respite has been in remembering, at the turn of the year, that Apple had signed a 2 year licensing agreement with a company called Liquid Metal (LQMT), nominally to reserve an exclusive option to use their impressive alloys – nearly 2 years ago. They’d also taken an equity investment in GT Advanced Technologies (GTAT), who were to use the investment to build a production facility in Arizona capable to manufacture phone-size displays made from Sapphire. Then a small smoke signal appeared in my Twitter feed, where someone said that Apple had filed a patent related to Liquid Metal at the US Patent Office in November 2013.
Hmmmm. I then started to get emails from the Motley Fool, saying that they knew of a recent patent filing, and that it was going to be a good opportunity to “get in early” on some secret stock they had the other side of a sales pitch for one of their investment programs. I’m already a subscriber to one of their other initiatives, so just sat that out, but tried to stay very tuned to LQMT (trading at 20c/share) and GTAT (who were around the $9 mark).
Buy buy buy
With a lack of signals arriving, I thought something would have to out ahead of the February end date of the Liquid Metal license, given that Apple had already put a patent in place using that technology. So, with around £4,700 cash in my SIPP, I elected to buy 22,000 shares of LQMT at $0.20 and 478 shares of GTAT at $9.22 on the 22nd January.
A couple of days later, news broke that employees of Apple had filed at least 7 more patents related to Liquid Metal alloys, and that GT Advanced Technology were putting pressure on US regulators to speed up the building of their new Arizona facility.
One blog I found along the way examined the Liquid Metal patents in great detail and were a fantastic, well researched read from a German expert. See: Philip Guehlke’s blog at http://www.techinsighter.com/
The Liquid Metal shares went off like a Roman Candle, zapping up from $0.20 to $0.39 in a week – and then meandered back down, sticking around the $0.29 mark. GT Advanced Technology were also climbing, but much less aggressively – though still over 20% in the first week.
I’m not used to holding shares that turn out to be quite that volatile, so I did an exit stage left on profits of 30.9% and 24.2% respectively – within 3 weeks of their original purchase. £1,450 profit. Well, that’s more than paid off the lack of Apple ROI ten times over. That said, LQMT shares are back at $0.22 now, and GTAT up at $16.00 or so, but overall happy with my lot.
Out of daily wild swings
I’m now back to my traditional position in long term buy and hold stocks only. That said, I do keep thinking about a few things as I see the buy side and sell side analysts batting Apple, Amazon and Google over tennis nets every day.
The way the market treat Apple is pretty unique. They’ve seen new product categories roll down the Apple conveyor belt to unprecedented worldwide success. iPod, iPhone, iPad… and they’re all staring down looking for evidence of yet another golden egg on its way. Contrast that to Amazon, who reinvest every penny of potential profit into building out their worldwide e-commerce infrastructure – to such an extent, the analysts think the first golden egg will arrive as soon as Jeff Bezos thinks it’s time to let it out.
New Product Categories
Apple management have indicated multiple new product categories will arrive in 2014. They have been going around the world trademarking the word “iWatch” and appear to have a wearable device in the works. Reputedly to have health monitoring related features. The main gotcha is that the market for watches worldwide at this stage is circa $1.2B/year, so it would be difficult to make any noticeable contribution to $170B/year Apple. More an accessory to the information hub that is the users iPhone.
They were reputed to be trying out a new set-top TV box that they were trialing with Time Warner Cable in the USA – at least until Comcast initiated their still ongoing attempt to buy that company. Comcast already have their own X1 box in several markets in the USA already. And again, the current Apple TV box – $99 each – and of which some 13 million had been sold to date – will again unlikely make a marked difference in Apple’s huge turnover. More as accessories to the main iPhone and iPad show.
All eyes on the next set of announcements
With that, it looks like iPhone, and to a lesser extend iPad, will continue to be their revenue and profit drivers, with new product categories likely to be ancillary accessories to support user engagement with those devices. Having seen the analyses of the Liquid Metal patents Apple have submitted, i’m fairly convinced the next models will be encased in Liquid Metal (instead of milled Aluminium for current high end models) and have scratch resistant Sapphire screens. That may also give them lower manufacturing costs to allow them to fill some of the other price bands that are growing most aggressively for their Android competitors. Or not!
Time will tell. The only thing i’m sure of is, that if they produce a health related iWatch, that my wife expect me to be first in the queue to buy one for her. And indeed a new handset if it’s an improvement to her much loved iPhone 5S. I certainly won’t let her down.