In May of 2012, all the hype in equities was the Facebook IPO. Analysts and traders had been waiting for the stock to go on sale for months, and the time had finally arrived. As many recall, the stock did not do all that well at the start. While initially trading at just over $38/share, by September Facebook was trading at an abysmal $17.75/share, a 54% decrease in value.
Meanwhile, Apple was on top of everyone’s list. Apple had opened 2012 at just over $400/share and by the time the Facebook IPO launched Apple was trading at over $550/share, a 37.5% gain in 5 months. By the middle of September, Apple was trading at just over $700/share, a 75% gain in 9 short months.
Beginning in September, the question that many investors were asking was which stock would perform better going forward, Apple of Facebook? Analysts argued that Facebook had not properly monetized mobile usage of the social network, and that Apple was continuing to hit homeruns with new product offerings, and that the iPad mini and iPhone 5 would surely take the stock higher.
What followed was a lesson that we preach to our clients and that we try to encourage all investors to do; seek value and upside potential.
After Facebook bottomed near $17.75/share in September, the stock proceeded to close out the year trading at $26.62/share, a 50% increase. Today, Facebook is trading back at the $35-$38/share range, a 114% increase off the bottom.
Apple’s stock did not fare so well. After reaching $702/share in September of 2012, Apple closed out 2012 at $532/share, a 25% decrease. Today Apple is trading at $500/share, a 28% decline off of their top.
What it all boils down to is that if you bought Facebook at their bottom in September you would have made a 114% return, while if you bought Apple at the same time you would have lost 28% of your money. Putting that into perspective, if you bought $1000 worth of Facebook at that time, today you would have $2140, while if you had done the same with Apple you would have $720.
Those are a lot of numbers to digest and I encourage readers to look up the tickers “FB” and “AAPL” on Yahoo Finance or any other charting tool to get a better visual picture, but these two stocks showcase an investing fundamental. Buying the hot stock of the moment is not always the best thing to do. When all the news is negative and investors are nay saying is typically a better time to start buying.
This piece is most definitely not a call to take any sort of action on Facebook or Apple, but rather a look at the recent history of these two companies’ stocks. This is a perfect piece of anecdotal evidence that if investors, both professional and amateur, are going to prosper in the business of trading, understanding and seeking value are the key to success.