What Is Apple Once the Romance Cools?

NEW YORK (TheStreet) -- Are Apple's ( AAPL) best days behind it? In terms of their gross sales, revenues, and overall financial strength? Probably not. How about in terms of stock performance? Almost certainly.

This is not a unique view, but I do think it can help illustrate a point about the role psychology plays in investing.

Apple was everyone's favorite stock back in 2006-a year in which the stock gained 82%. Incidentally, it was also everyone's favorite stock in 2007 (+136%), 2008 (-56%), 2009 (+132%), 2010 (+51%), 2011 (+23%), and 2012 (+31%).

It should be noted that in 2012 alone AAPL was up 70% by early September before succumbing to the market's gravitational force, also known as mean reversion. By "everyone" I mean retail investors, mutual funds, and even hedge funds. Just two years ago the computer-turned-software-turned-music-turned-phone company made up 20% of the NASDAQ index ( QQQ). It has since been reduced to about 12.5% but is still the index's largest holding today-by more than 4%-next to Microsoft ( MSFT).

To be fair, I don't think Apple gets enough credit for its role in the U.S. stock market rebound since 2009. One thing we knew during the tenuous early parts of the recovery, regardless of which Fortune 100 company was laying off thousands of employees or which European country was announcing that it was "out sick," Apple's stock would be up. Of course this is not literally true, but it's also not too far off. I believe Apple played an extraordinary role in maintaining investors' faith -- to the extent it was possible at that time -- in our capital markets' ability to create wealth during one of the steepest bear markets ever seen.

Today I still get questions, almost daily, about where Apple is trading and where I think it's going. For the most part my response is something like, "Why do you ask?"

Unless you worked for the company it may be time to let go of the fantasy that owning the stock is going to make your dreams come true.

Let's not forget a hugely important piece of information that nobody likes talking about: Steve Jobs passed away over two years ago. Many diehard Apple fans simply don't want to admit the importance and relevance Jobs' vision and existence played in the company's (and stock's) success. These folks point to the fact that after Jobs passed on Oct. 5, 2011, Apple stock soared to all-time highs over $700 per share. See! It wasn't just the Jobs Effect!

Are you sure? What about when compared to the S&P 500 during the entire post-Jobs era?

Or how about the fact that despite revenues being higher, their quarterly revenue growth has been shrinking somewhat dramatically for the past two years.

My point isn't that Apple is no good. My point isn't that Tim Cook is no good. My point isn't even that I don't want to own the stock. My point is that Steve Jobs was special, and spectacular, and he brought a premium to shareholders that lasted a full year after his death. That premium was due to his one-of-a-kind ability to understand not just what people want today, but what they will want tomorrow. Jobs wasn't just Apple's vision, he was also their best salesman. He made both Apple's products and stock something you just wanted to own. It was fun, and even romantic.

But perhaps the romance is over. Perhaps it's time to finally take Apple for what it's worth -- about $520 per share -- and not continue expecting the impossible. Perhaps it's time, in a sense, to move on.

Maybe there is something else in your portfolio presenting the same psychological challenge. Are you holding on to something that is no longer serving you? Maybe it's a stock you have owned "forever" and have "grown to love." Maybe it's an annuity somebody sold you back in 1998 and you just don't want to admit you never should have bought it in the first place. Maybe you are holding onto the idea that a 60/40 allocation (60% stocks, 40% bonds) should get you safely to the promised land.

My guess is that this concept applies to all of us on some level. The psychology of investing can't be accurately or dependably quantified. But just because you can't measure it doesn't mean it's not there, and it certainly doesn't mean it's not important.

-- Written by Adam B. Scott, founder of Argyle Capital Partners, in Los Angeles.

At the time of publication the author was long QQQ.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Adam B. Scott is a founder of Argyle Capital Partners, a fee-only Registered Investment Advisor based in Los Angeles. A veteran of Morgan Stanley and UBS Wealth Management in Beverly Hills, Calif., Adam uses his extensive market knowledge and macro-level analysis to implement customized solutions for high net worth private clients. Adam is an avid tennis player and skier, and volunteers his free time to the Fulfillment Fund, the Tufts Alumni Association and coaching local youth sports.

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