A Plea for Apple-Loving AAPL Shareholders

The news that Steve Jobs needs more than vitamins and will need to take some time off from being a visionary sent Apple’s stock plummeting in after-hours trading. More than $6 billion in market cap was wiped out at one point.

This, understandably, has Apple fans buzzing.

Robert Scoble, an analyst at Cititwat, a boutique Silicon Valley investment bank, issued an advisory to his clients: “You are an idiot if you sell your Apple stock tomorrow.”

According to Scoble, who has done extensive first-hand research on Apple’s supply chain:

Apple is fine and we’ll all buy the next big thing that they do no matter who brings it to us. Steve Jobs has built a killer team that everyone wants a piece of and that culture will be around for years. I met many of them in China and they are regarded among supply chain guys there as the best in the business (and the most demanding). That won’t go away because Steve isn’t at the helm anymore.

When questioned on the possibility that the market may not agree with him, Scoble responded: “take advantage of idiots. ”

At the fund I trade for, which I’ll call Goldchain Saks 5th Avenue LP based on our performance in 2008, we have taken a different approach. We ignored Wall Street bad boy Henry Blodget when he called AAPL’s price a 33% off sale (turns out the best sales of the season were yet to come) and we ignored Howard Lindzon when he expressed his confidence in Google by investing the kids’ community college education fund in GOOG.

No, by the time idiots like Blodget and Lindzon were looking for bargain buys, we were deep in the money on the short side and had already booked some profit.

We went short AAPL in early June on technicals, traded out and back into a portion of the position at various times over the next 6 months while holding the rest and closed out the entire position in December. The charts were clear and they still are – AAPL is not a screaming buy.

Same with GOOG, which we shorted in late June on technicals and still have a smaller short position open on.

Is a bottom in? Maybe (in my opinion probably not). But opinion is entirely irrelevant. Smart traders don’t try to pick bottoms: they look for signs of reversal. Why exactly would you want to buy into what is more likely, at best, to turn into a sideways market? Note to idiots: V-shaped stock market recoveries almost never occur.

While I’m not going to give “advice”, I’m going to offer a few suggestions to iPhone-loving AAPL shareholders (and anyone else holding shares of companies they “believe” in). Food for thought, if you will.

Here’s the deal: consider that a stock is just a stock. It’s an investment instrument. If you love Apple, you can support the company by spending your money on an iPod or an iPhone. You don’t have to own an interest in the company.

The reality is that falling in love with a stock can cause you to make bad decisions (just as falling in love with a woman can cause you to make bad decisions). Therefore, save all your love for women because even if you lose your shirt on a bad investment in a vixen, it will almost certainly have been far more enjoyable than watching your 401k evaporate.

Also, please consider the possibility that buy and hold is bullshit. If you had bought into the market in the late 1990s, held through the .com bust, watched as stocks peaked in late 2007 and continued holding, today you’d be under water with most issues.

The idiots who are still spouting off about buying and holding for the “long term” have lost money. They said the same things in the late 1990s and look where they’re at now. Broke or managing a fund that is the Wall Street equivalent of the Titanic.

Bottom line: if you want to love something, you should probably get a girlfriend or buy a puppy (or if you’re a .com millionaire, buy a girlfriend and adopt a puppy). Treat a girl and a puppy right and they’ll love you back. A stock probably won’t. And please don’t be fooled by this “long term” nonsense. Your capital is valuable. Buying into something that could be underwater for years (or forever for that matter) doesn’t make sense unless you’re prepared to swim in the cold, deep waters of the global economy. Naked.

For those who still “believe” in Apple and who may very well be right about the company’s prospects, I’ll leave with a John Maynard Keynes quote: “The market can stay irrational longer than you can stay solvent.” Being right is not nearly as fun as being rich.