I Was Only Taught "Don't Buy" and "Risky."
June 2, 2010 10:47 PM Subscribe
Any reason not to sell my 20 shares of AAPL?
My wonderful, perceptive grandmother gave me 5 shares of AAPL (Apple) as a Christmas present back in the mid/late nineties. I'm not 100% sure on the exact year, but I remember it was purchased at $12 a share (I'm quite sure it was before the first split in 2000.) Unless I'm misunderstanding, (and let me know if I am) what started as 5 shares is now 20 because the stock has split twice since the purchase.
Given that these 20 shares would now sell for around $5,200 (AAPL is trading around 260) is there any reason for me not to sell them? Asking mostly from a "don't know anything about stocks and the market" position. I know financial questions can revolve around your personal financial situation, but I'm mostly concerned with whether this comes off as a terrible idea to the sort of person who knows anything about the stock market.
My wonderful, perceptive grandmother gave me 5 shares of AAPL (Apple) as a Christmas present back in the mid/late nineties. I'm not 100% sure on the exact year, but I remember it was purchased at $12 a share (I'm quite sure it was before the first split in 2000.) Unless I'm misunderstanding, (and let me know if I am) what started as 5 shares is now 20 because the stock has split twice since the purchase.
Given that these 20 shares would now sell for around $5,200 (AAPL is trading around 260) is there any reason for me not to sell them? Asking mostly from a "don't know anything about stocks and the market" position. I know financial questions can revolve around your personal financial situation, but I'm mostly concerned with whether this comes off as a terrible idea to the sort of person who knows anything about the stock market.
With Apple releasing the new iPhone soon, I'd at least wait till after then. Your stock value will probably grow a bit more in the next 1-2 months.
posted by jgunsch at 11:00 PM on June 2, 2010
posted by jgunsch at 11:00 PM on June 2, 2010
If I owned a stock that had doubled in the last year, I'd sure sell.
posted by lukemeister at 11:17 PM on June 2, 2010
posted by lukemeister at 11:17 PM on June 2, 2010
Also, not to be morbid, but if Steve Jobs dropped dead tomorrow, I think Apple's stock price would drop a lot.
posted by lukemeister at 11:25 PM on June 2, 2010
posted by lukemeister at 11:25 PM on June 2, 2010
I would hold off until after WWDC next week. Apple stock tends to get big boosts during/after their events, and I don't see a reason it would be any different this time (especially if the new iPhone is announced, as expected).
posted by cvp at 11:36 PM on June 2, 2010
posted by cvp at 11:36 PM on June 2, 2010
Your cost basis is low, meaning you're going to incur some significant capital gains tax if you do sell. Not a reason not to sell, but something to be aware of.
Actually, if you're of low income, you won't pay any capital gains on it. And if your marginal tax rate is 15% or higher, you'll be paying lower capital gains this year than you will next year, when the rate goes back up to 20%.
posted by one_bean at 11:38 PM on June 2, 2010 [1 favorite]
Actually, if you're of low income, you won't pay any capital gains on it. And if your marginal tax rate is 15% or higher, you'll be paying lower capital gains this year than you will next year, when the rate goes back up to 20%.
posted by one_bean at 11:38 PM on June 2, 2010 [1 favorite]
I think most people have AAPL's price target at around $315-$320. This is to say, a price institutional investors can see it hitting and see them taking profit at. That has NO bearing on where the stock will actually go. It's swung a bit with the market swings over the past week or two and the new iPhone is probably priced in already. Strong iPad sales are also factored in to its current price, along with great margins, etc, etc.
Since you didn't pay anything for the shares, you can definitely cash out of these now, or you can keep holding them and see if they push up to the $300 range. They're just as-if-not-more likely to drop back to the $220 or $230 range, and lukemeister is totally right: Steve Jobs drops dead and you'll see this stock shave off 30% of its value in the day to come. (It'll bounce back as investors realize it's a good buy, but the intrinsic value of the company is VERY tightly knit with the vision of Sir Jobs and it might never be the same.)
Jobs also had a liver transplant, which means dropping dead isn't completely on the fringe of possibilities (moreso than say, some CEO getting hit by a bus.)
This is all by way of saying, what's your goal here? Do you need the cash? Are you worried about it dropping in value? Apple is well-positioned with products that keep printing money and great margins. Their fundamentals are insanely strong and they proved they're entirely recession-proof, as people kept gobbling iPhones right on up. Jobs has the golden touch and it's completely possible we'll see AAPL close in on $350/share within the next year.
But it could get beaten up with the rest of the market. And Jobs' health could cause trouble if something tragic happened. There's nothing wrong with taking your profit now and enjoying your $5,000.
You could also sell a portion, or set things up with your broker to set a stop-loss and configure it to sell if it hits, say, $245. Given its recent volatility, that may be a bit too close, but it'll make sure you don't miss out on too much additional cash. In the end, it's all gravy though, so you don't need to agonize about it nearly as long as my post here might otherwise imply. :-)
posted by disillusioned at 11:45 PM on June 2, 2010
Since you didn't pay anything for the shares, you can definitely cash out of these now, or you can keep holding them and see if they push up to the $300 range. They're just as-if-not-more likely to drop back to the $220 or $230 range, and lukemeister is totally right: Steve Jobs drops dead and you'll see this stock shave off 30% of its value in the day to come. (It'll bounce back as investors realize it's a good buy, but the intrinsic value of the company is VERY tightly knit with the vision of Sir Jobs and it might never be the same.)
Jobs also had a liver transplant, which means dropping dead isn't completely on the fringe of possibilities (moreso than say, some CEO getting hit by a bus.)
This is all by way of saying, what's your goal here? Do you need the cash? Are you worried about it dropping in value? Apple is well-positioned with products that keep printing money and great margins. Their fundamentals are insanely strong and they proved they're entirely recession-proof, as people kept gobbling iPhones right on up. Jobs has the golden touch and it's completely possible we'll see AAPL close in on $350/share within the next year.
But it could get beaten up with the rest of the market. And Jobs' health could cause trouble if something tragic happened. There's nothing wrong with taking your profit now and enjoying your $5,000.
You could also sell a portion, or set things up with your broker to set a stop-loss and configure it to sell if it hits, say, $245. Given its recent volatility, that may be a bit too close, but it'll make sure you don't miss out on too much additional cash. In the end, it's all gravy though, so you don't need to agonize about it nearly as long as my post here might otherwise imply. :-)
posted by disillusioned at 11:45 PM on June 2, 2010
If you like thinking or telling people you're an actual Apple stockholder of record (instead of the holder of a nebulous mutual fund fraction of AAPL), or you might conceivably want to go to a stockholder's meeting, then it's OK to hold 'em. Or at least keep a share or two.
There are small shareholders who derive mild amusement or satisfaction from voting against most of a stock's board recommendations or against the board of directors, knowing that their vote will make not a whit of difference to the voting outcome. Not that I would ever do such a thing with my 14 shares of AAPL. (Confidentially, I do it every year. Take that you arrogant corporate overlords!)
Other than those personal reasons, Apple is so freaking volatile and dependent on unpredictable variables like Steve Jobs' health, and whether their latest gizmo will sail or bomb, that it's practically impossible for a nonprofessional (and likely professionals) to reasonably predict whether AAPL is close to the top of its potential market price. Eventually its stock price is going to slide down for a while, and probably hard, but it might double again before it does.
Here is one interesting factoid: Apple's current market cap ($240B) is almost half of the highest market cap of any US company in the past ten years, so if you're a believer in the idea that companies only become worth so much before the inevitable fall, you're probably not going to expect to see large multiples of increase from where the stock is priced now.
If you badly need that five grand, I'd consider selling it and not looking back. You can almost never hit the exact top of a stock's market. If you don't need the money, well, are you gonna regret it if it becomes $2K or less? Or if you sell and it becomes $10K? In the grand scheme of personal financial planning, these are fairly low dollar figures either way, but for the poor or young, they can still be life-changing.
posted by mdevore at 12:19 AM on June 3, 2010 [3 favorites]
There are small shareholders who derive mild amusement or satisfaction from voting against most of a stock's board recommendations or against the board of directors, knowing that their vote will make not a whit of difference to the voting outcome. Not that I would ever do such a thing with my 14 shares of AAPL. (Confidentially, I do it every year. Take that you arrogant corporate overlords!)
Other than those personal reasons, Apple is so freaking volatile and dependent on unpredictable variables like Steve Jobs' health, and whether their latest gizmo will sail or bomb, that it's practically impossible for a nonprofessional (and likely professionals) to reasonably predict whether AAPL is close to the top of its potential market price. Eventually its stock price is going to slide down for a while, and probably hard, but it might double again before it does.
Here is one interesting factoid: Apple's current market cap ($240B) is almost half of the highest market cap of any US company in the past ten years, so if you're a believer in the idea that companies only become worth so much before the inevitable fall, you're probably not going to expect to see large multiples of increase from where the stock is priced now.
If you badly need that five grand, I'd consider selling it and not looking back. You can almost never hit the exact top of a stock's market. If you don't need the money, well, are you gonna regret it if it becomes $2K or less? Or if you sell and it becomes $10K? In the grand scheme of personal financial planning, these are fairly low dollar figures either way, but for the poor or young, they can still be life-changing.
posted by mdevore at 12:19 AM on June 3, 2010 [3 favorites]
I think most people have AAPL's price target at around $315-$320. T
If "Most people" had apple's target price at $315 the stock price would be $315. that's how the market works. They don't leave the money on the table. I bought some AAPL at about $200 and in a couple of months it was $89. No one knows what's going to happen with the global economy, what's going to happen to the Eurozone and how that's going to effect American companies, etc. If you want the money, sell.
The best time to sell a stock is when it's been going up for a while, which AAPL has been doing. It could go up more, it could go back down.
posted by delmoi at 1:08 AM on June 3, 2010 [1 favorite]
If "Most people" had apple's target price at $315 the stock price would be $315. that's how the market works. They don't leave the money on the table. I bought some AAPL at about $200 and in a couple of months it was $89. No one knows what's going to happen with the global economy, what's going to happen to the Eurozone and how that's going to effect American companies, etc. If you want the money, sell.
The best time to sell a stock is when it's been going up for a while, which AAPL has been doing. It could go up more, it could go back down.
posted by delmoi at 1:08 AM on June 3, 2010 [1 favorite]
An untrained investor like yourself shouldn't dabble in short term speculation. The only question for you is whether to sell immediately or hold for the long run (at least another five years).
Adjusted for splits, your stock price has quadrupled. To make the math easy, let's assume the stock was bought in 1996. Your annualized growth is a aolid 10%, every year, over 14 consecutive years. That's an incredible run, unlikely to be repeated...especially if Jobs dies.
Moreover, the headlines have been a buzz with news of Apple's market capitalization exceeding Microsoft and approaching that of ExxonMobile, both of whom have much higher revenues than Apple. Apple's P/E ratio is insane. Seems to me like a textbook opportunity to start shorting AAPL.
Sell.
posted by randomstriker at 3:03 AM on June 3, 2010
Adjusted for splits, your stock price has quadrupled. To make the math easy, let's assume the stock was bought in 1996. Your annualized growth is a aolid 10%, every year, over 14 consecutive years. That's an incredible run, unlikely to be repeated...especially if Jobs dies.
Moreover, the headlines have been a buzz with news of Apple's market capitalization exceeding Microsoft and approaching that of ExxonMobile, both of whom have much higher revenues than Apple. Apple's P/E ratio is insane. Seems to me like a textbook opportunity to start shorting AAPL.
Sell.
posted by randomstriker at 3:03 AM on June 3, 2010
Most of the Apple shares I still have were about $24.
Selling would be smart, but I won't, because I'm a silly romantic.
posted by rokusan at 6:23 AM on June 3, 2010 [1 favorite]
Selling would be smart, but I won't, because I'm a silly romantic.
posted by rokusan at 6:23 AM on June 3, 2010 [1 favorite]
If you want to stay invested, sell it and put the money (less taxes) into a low cost mutual fund or ETF. Start reading www.bogleheads.org; it will tell you everything you need to know, and more, about investing properly.
posted by dudeman at 7:11 AM on June 3, 2010
posted by dudeman at 7:11 AM on June 3, 2010
p.s. good idea to sell. no one ever went broke buying low and selling high, as you are now doing. holding a single stock is not a diversified investment and leaves you vulnerable to risks that you can avoid by owning the entire market (i.e. shares of Vanguard Total Stock Market fund or the like). If you sell and AAPL goes up the next day, don't kick yourself. It's impossible to time the market.
posted by dudeman at 7:26 AM on June 3, 2010
posted by dudeman at 7:26 AM on June 3, 2010
It's probably a good idea to wait till after WWDC if you do decide to sell. Or till the next iPhone launches later this summer, as they'll probably sell a shit-ton of phones. Do you have ideas for what you want to do with the money. As people noted up thread, there are capital gains taxes you incur when you sell. I'm not sure how that works.
Good job Grandmother, also.
posted by chunking express at 7:31 AM on June 3, 2010 [1 favorite]
Good job Grandmother, also.
posted by chunking express at 7:31 AM on June 3, 2010 [1 favorite]
All the comments up above trying to time Apple's stock price are hilarious. You have one simple question to answer for yourself: if you had $5200 today, would you buy 20 shares of Apple? If you think to yourself "no way!" then probably you should sell. One relatively conservative thing to do would be to then buy $5200 of a stock index fund like Vanguard's S&P 500 fund. You stay invested in stocks, but diversified away from the risk of a single company. Or spend the money on something nice for yourself. Depends on your financial situation.
The only tactical question here is tax timing. You're likely to pay the 15% long term capital gains rate, which as noted above will go up to 20% next year. That's historically a very low tax, if you're going to sell then tax-wise it's a good time. One tax option is to give the appreciated stock to a charity: no one pays any capital gain taxes, and you get the full writeoff.
posted by Nelson at 7:41 AM on June 3, 2010 [1 favorite]
The only tactical question here is tax timing. You're likely to pay the 15% long term capital gains rate, which as noted above will go up to 20% next year. That's historically a very low tax, if you're going to sell then tax-wise it's a good time. One tax option is to give the appreciated stock to a charity: no one pays any capital gain taxes, and you get the full writeoff.
posted by Nelson at 7:41 AM on June 3, 2010 [1 favorite]
Correct me if I'm wrong, but doesn't Apple's stock actually usually dip after an event because Steve is always expected to announce to the iUnicorn and never does?
posted by entropicamericana at 8:50 AM on June 3, 2010
posted by entropicamericana at 8:50 AM on June 3, 2010
Yeah, but isn't there usually a big buying frenzy after that, and the price sails off into the stratosphere. Anyway, your stock is worth a ton more than what you paid for it. It's really not a big deal when you sell at this point. You are going to make a bunch of cash-money.
posted by chunking express at 8:56 AM on June 3, 2010
posted by chunking express at 8:56 AM on June 3, 2010
Oh, and with the iPad on track to sell 5-6 million units in the first year alone, I'd hold onto the stock for a while longer.
Then again, Steve was looking pretty skeletal at D8...
posted by entropicamericana at 8:59 AM on June 3, 2010
Then again, Steve was looking pretty skeletal at D8...
posted by entropicamericana at 8:59 AM on June 3, 2010
It's not a dividend stock, no the only way for your investment to appreciate is if the stock keeps climbing. It may do that, or it may fall victim to what many experts believe is the coming bear market.
I invest. I've made some good decisions, I've made some bad decisions, and I've mistimed the market once or twice. Some of my worst mistakes have been when I've held on to stocks thinking that if I wait "just X more X", even though I had already put it in the "Sell this" pile, that it would make even *more* money. The *more* money trap is one you have to learn to avoid.
Your return has been incredible, but just like the MS stock I bought back in high school lo those many years ago, the odds of it doing again in growth what it did during the internet revolution is really small. (IMHO).
I hold on to "dividend aristocrat" stocks, and I have each dividend payment rolled into shares of stock, thereby creating a larger dividend.
But non-dividend stocks, I have a number in my head that I want to see; X% value return over Y period of time. I don't get sentimental, I don't worry about future gains or losses; I do sheer profit taking. Have there been times when I've sold a stock and it's gone way higher? Yep. But then you're talking about imaginary gains, vs REAL gains. There's just as good a chance that the stock could go down to zero as there is for it to double.
TL;DR: Take the money and walk away from the table happy.
posted by SecretAgentSockpuppet at 10:01 AM on June 3, 2010
I invest. I've made some good decisions, I've made some bad decisions, and I've mistimed the market once or twice. Some of my worst mistakes have been when I've held on to stocks thinking that if I wait "just X more X", even though I had already put it in the "Sell this" pile, that it would make even *more* money. The *more* money trap is one you have to learn to avoid.
Your return has been incredible, but just like the MS stock I bought back in high school lo those many years ago, the odds of it doing again in growth what it did during the internet revolution is really small. (IMHO).
I hold on to "dividend aristocrat" stocks, and I have each dividend payment rolled into shares of stock, thereby creating a larger dividend.
But non-dividend stocks, I have a number in my head that I want to see; X% value return over Y period of time. I don't get sentimental, I don't worry about future gains or losses; I do sheer profit taking. Have there been times when I've sold a stock and it's gone way higher? Yep. But then you're talking about imaginary gains, vs REAL gains. There's just as good a chance that the stock could go down to zero as there is for it to double.
TL;DR: Take the money and walk away from the table happy.
posted by SecretAgentSockpuppet at 10:01 AM on June 3, 2010
This is not investment advice and I hold no position in AAPL:
Other than those personal reasons, Apple is so freaking volatile and dependent on unpredictable variables like Steve Jobs' health, and whether their latest gizmo will sail or bomb, that it's practically impossible for a nonprofessional (and likely professionals) to reasonably predict whether AAPL is close to the top of its potential market price. Eventually its stock price is going to slide down for a while, and probably hard, but it might double again before it does.
This is so true. Although I think the odds of AAPL doubling are pretty low. For AAPL to sustain its current trajectory it must keep redefining/inventing new product categories every year. Are you confident it can keep coming up with ideas like the ipod, iphone, itablet indefinitely? Because merely creating new products is not going to keep AAPL's revenues where they are. To do that, AAPL must constantly innovate whole new product lines. MSFT was not able to do that, and neither will AAPL be able to. If AAPL paid a good dividend I would tell you to consider keeping it. In your position I would take your profits and run.
posted by An algorithmic dog at 1:18 PM on June 3, 2010 [1 favorite]
Other than those personal reasons, Apple is so freaking volatile and dependent on unpredictable variables like Steve Jobs' health, and whether their latest gizmo will sail or bomb, that it's practically impossible for a nonprofessional (and likely professionals) to reasonably predict whether AAPL is close to the top of its potential market price. Eventually its stock price is going to slide down for a while, and probably hard, but it might double again before it does.
This is so true. Although I think the odds of AAPL doubling are pretty low. For AAPL to sustain its current trajectory it must keep redefining/inventing new product categories every year. Are you confident it can keep coming up with ideas like the ipod, iphone, itablet indefinitely? Because merely creating new products is not going to keep AAPL's revenues where they are. To do that, AAPL must constantly innovate whole new product lines. MSFT was not able to do that, and neither will AAPL be able to. If AAPL paid a good dividend I would tell you to consider keeping it. In your position I would take your profits and run.
posted by An algorithmic dog at 1:18 PM on June 3, 2010 [1 favorite]
the coming bear market.
"Coming"?
Most analysts seem rather frisky. NB, however, analysts tend to be prejudiced on the buy side. You've had a good run against the broader market. Generally a sign to take some money off the table. Diversify into other area. Learn about markets.
You also might want to keep at least a few shares in the game. I would. Google Apple Revenue Streams and see what you think of their possible future prospects and whether you think them good. Will they go deeper into content? Into telecommunications? Into Microsoft's lunch?
If "Most people" had apple's target price at $315 the stock price would be $315. that's how the market works. They don't leave the money on the table.
Sounds like you're confusing Target Price (future projections based on numbers and alchemy) and Market Price (ticker price here and now).
posted by IndigoJones at 5:41 PM on June 3, 2010
"Coming"?
Most analysts seem rather frisky. NB, however, analysts tend to be prejudiced on the buy side. You've had a good run against the broader market. Generally a sign to take some money off the table. Diversify into other area. Learn about markets.
You also might want to keep at least a few shares in the game. I would. Google Apple Revenue Streams and see what you think of their possible future prospects and whether you think them good. Will they go deeper into content? Into telecommunications? Into Microsoft's lunch?
If "Most people" had apple's target price at $315 the stock price would be $315. that's how the market works. They don't leave the money on the table.
Sounds like you're confusing Target Price (future projections based on numbers and alchemy) and Market Price (ticker price here and now).
posted by IndigoJones at 5:41 PM on June 3, 2010
You didn't buy the stock, so... to you it's free money. Sure, you're trying to get the most out of it, and I'd do the same, but if you're not planning on holding on to the stock for another five to ten years, I'd sell shortly after the new iPhone is released. Bought low, sold high. Have a beer and celebrate.
Nobody has a crystal ball. Steve Jobs could d... he could di... sheesh. I can't even make myself type it. On the other hand, Apple could be the company that finally bridges the gap between a 'computer' and a home stereo/TV/media center in a dead simple way, similar to how the iPhone mad smartphones dead simple. Somebody is going to, and that somebody will make a killing. I could definitely see Apple being that somebody.
Do you keep waiting and watching the stock rise and fall, and then rise again? Will it rise again? Will we see another terrorist attack that cripples the stock market? Who knows.
What do you want to do?
My advice: Do that.
posted by 2oh1 at 6:06 PM on June 3, 2010
Nobody has a crystal ball. Steve Jobs could d... he could di... sheesh. I can't even make myself type it. On the other hand, Apple could be the company that finally bridges the gap between a 'computer' and a home stereo/TV/media center in a dead simple way, similar to how the iPhone mad smartphones dead simple. Somebody is going to, and that somebody will make a killing. I could definitely see Apple being that somebody.
Do you keep waiting and watching the stock rise and fall, and then rise again? Will it rise again? Will we see another terrorist attack that cripples the stock market? Who knows.
What do you want to do?
My advice: Do that.
posted by 2oh1 at 6:06 PM on June 3, 2010
Even if apple is going to do well compared to other market participants, the market overall is so uncertain these days.
posted by delmoi at 2:11 PM on June 4, 2010
posted by delmoi at 2:11 PM on June 4, 2010
This thread is closed to new comments.
posted by qxntpqbbbqxl at 10:53 PM on June 2, 2010