Caroline Ritchie: Apple's sweetness in facts

Cunning where others see confusion, decisive in the midst of a fray and quick as fox. Pity he's not an investment adviser.
Everyone in Cupertino, California knows who the cleverest chap on their block is, though - and that's Steve Jobs. The largest corporate prodigal son in the history of technology stocks has taken a leave of absence from his role as CEO of Apple. His health is suffering. But his company is not.
Apple Inc is now the second-largest listed company on the planet, after Exxon Mobil.
The last time Jobs went on sick leave, the company was handled very nicely by a chap called Tim Cook. In fact during this time shareholders were made about 60 per cent richer, thanks to Cook's positive corporate machinations.
Cook, in turn, was paid US$59 million that year for making the shareholders so happy. That's 59 million times what Jobs collected that year. His US$1 annual salary is as famous as he is.
Investors who did especially well were the ones who bought the rumour and sold the fact. In this case, it means they bought stock when others were irrationally dumping it on news of the CEO's ill health. They then waited until sanity prevailed and the world realised, yet again, that Apple was still going to make huge piles of money whether Jobs was in the building or not.
The fundamental reality should win out every time - that is the basic tenet of the capital markets. And it does work.
So far in each of the about nine announcements of serious health issues concerning Jobs the pattern has been the same - a big dip followed by a satisfying large bounce. The profitable strategy has been exclusively to buy on fear and sell into the numbers.
Traders usually wait until the quarterly results to sell. Apple's almost blatant policy of understating and over-delivering on earnings is famous. So in theory everyone should know about it and factor it in - but the share price nearly always loves a good result anyway. Investors also seem to relish the secretive lead-up to certain quarterlies - the ones made in conjunction with new product launches.
New product launches from Apple tend to send even the most hardened tech analyst into stratospheric waves of ecstasy, with equally powerful effects on the stock price. These are convincing examples of market signalling and how emotive reasons can prevail, rightly and wrongly, for a short time in the market, providing bankable opportunities for those who go by the spreadsheet and not with the sheep herd.
Caroline Ritchie is an NZX adviser for Forsyth Barr in Napier and holds an NZX Diploma, BCom and BSc. For sharemarket advice contact her on (06) 835 3111 or caroline.ritchie@forbar.co.nz.
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