One Diver’s Perspective.

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Apple (AAPL) Stock, Worthless?

Apple stock is more worthless than the stock of nearly every other company. This is not a criticism of the company, or its products, but of the stock market in general.

Unlike many stocks, Apple does not pay its shareholders a dividend. Therefore, its shareholders receive nothing by virtue of owning the company and must rely on the possibility of there being another person who is willing to pay more for the stock than the shareholders did, in order to realize any benefit from ownership.

Now, it is true, as a shareholder one has the right to vote, but such a right is hardly worth the cost of ownership, and offers no tangible benefit. Theoretically, any non-dividend paying stock offers the same drawbacks, but Apple is somewhat unique. With virtually every other company, there remains the possibility that another company or investor will take the accompany “private” or otherwise acquire it, and pay the shareholders for their ownership interests. However, Apple is a large company, representing 20% of the NASDAQ 100, in addition to which it has tens of billions of dollars in cash, making it an impossible takeover candidate at today’s prices.

Which brings me back to my original thesis, that the stock is worth nothing except what someone else might be willing pay for it. If the stock paid a dividend, it would be worth the present value of all future dividend payments, regardless of whether anybody was willing to purchase the stock from its current shareholders.

I have realized tens of thousands of dollars in gains, buying and selling Apple stock, and I expect others have done even better. But, the more I think about it, the more I realize it is a foolish company to invest in. All the more so because so much of the company’s perceived fortunes (and therefore, its stock price) is dependent upon the health and wellbeing of Steve Jobs, who, despite what some may think, is a mortal man, subject to certainty of death, which will nearly certainly cause the stock price to plummet, at least temporarily.

I for one wold prefer to own a solid company paying a solid dividend, and hope that it will be taken over one day, with a premium paid to existing shareholders. That is just not something that is remotely possible with Apple, precisely because it has become so successful and so large. One day like Microsoft did, perhaps it will declare a dividend. Until that time, I will strongly consider selling my position, or reducing it substantially.


July 21, 2010 Posted by | Life | , | 2 Comments