By Libardo Lambrano On September 21, 2012, Apple (AAPL) reached $700 per share for the first time, only to go back down to $390 per share six months later. The company has had a fantastic run since 2010, but its current price of $628 is still under the $700 peak in 2012. Apple invests huge amounts of money in research, design and development, but it seems that the company may be suffering from the paralysis of perfectionism syndrome. The endless pursuit of the perfect, the enemy of the good and product execution, famously killed off Duke Nukem, one of the best computer games of all time. The original Duke Nukem game was so successful that the development team tasked to create a sequel utterly failed. George Broussard, one of the owners of 3D Realms, the creator of the game, forced his team to re-start from scratch every time a new gaming technology was available (which at the time seemed to be almost every day). After Broussard and his partner Scott Miller had spent $20 million of their own money over a span of 12 years, they disbanded all development at 3D Realms in 2009. In the quest for the perfect sequel to an original game released in 1996, nothing was ever released. This is one of the most interesting stories of success paralysis in recent history. A similar challenge seems to be plaguing Apple lately. It's not clear whether executives are perfecting the Apple TV or Apple smart-watch, but something is clearly in the works. Is Apple waiting for the perfect moment that may never arrive? In contrast to 3D Realms, Apple is one of the largest companies in the world. Even so, the company (and its share price) risk stagnation if innovation and product launches stop. Just ask Bill Gates and the team at Microsoft (MSFT). In November 2012, I reduced my position in Apple, due to rising business expenses and increasing competition. Yet even after that slight reduction, the stock still comprises close to 10% of my entire portfolio. Will Apple really be able to launch a game-changing product again? iTunes radio was a complete fiasco. It never got better: it was difficult to use and glitchy, and was years behind of rdio, Spotify or even Pandora. I just cancelled my subscription and moved on to a different service. I am curious to see what develops after their recent acquisition of Beats - especially since Apple is a company that hasn't done a lot of large acquisitions in the past. I'm still invested in Apple for the long run, but since questions remain I plan to keep a close eye on it. As of June 19th, since inception (01/19/12), the model is up 18.6.% (annualized) through the end of May, versus 20.8% for the S&P 500 Index (SPX). The return of the S&P 500 in May 2014 was close to 2.1%, as compared with close to 2.0% for my Dividend Paying Large Caps portfolio. Year-to-date my portfolio is up 6.19% as compared with 4.07% of the S&P 500. In May, Apple (AAPL), JC Penny (JCP), and American Express (AXP) all performed well. They were up 7.3%, 5.5%, and 4.7% respectively. The stock that hurt my portfolio in May was actually one of my recent acquisitions: Pfizer (PFE), which declined -5.3% after the failed $117 billion bid for AztraZeneca (AZN). At 18.11 PE and 3.5% dividend, Pfizer is a position I'll plan to hold for the rest of the year. Pfizer is one of the large cap companies with more aggressive stock buyback programs, which shows management responsibility and commitment to investors.
In May 2014, I added two positions to my portfolio. Lukoil (LUKOY), a Russian company engaged in the exploration, production, refining, marketing and distribution of crude oil and petroleum products.In March Russian stocks took a hit after President Barack Obama said the U.S. was considering sanctions against key economic sectors in Russia (including financial services, oil and gas, metals and mining and the defense industry) if Moscow made military moves into eastern and southern Ukraine. Given this context, I would call this an opportunistic investment on my part. LUKOY is also paying a healthy dividend of 4.14%. Once the Ukranian crisis ends, in my opinion this stock could possibly appreciate. The other position I added to my portfolio was also an opportunistic trade. Ralph Lauren (RL) has been down -13.25% this year along with the apparel manufacturing industry as a whole. Other house brands such as Aeropostale (ARO), and Guess (GES) have been trending down as well in 2014. RL pays a 1.17% dividend and has very little debt. In my opinion, the company's recent decline in sales is due to tough economic times and shifting market trends, but will return to normal sooner or later. Liquidations in May 2014 I closed two positions because I believed there were better opportunities in the market. While I think these companies were worth holding, I found some undervalued jewels with better upside potential. The positions I liquidated in May were Qualcomm (QCOM) and US Bancorp (USB). If all things stay equal in June, I won't be liquidating any other positions. I am comfortable with the 12 stocks I currently hold in my portfolio. DISCLAIMER: The investments discussed are held in client accounts as of May 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
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