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I wrote more articles about Apple than almost any other company over the last five years. For a long time it was one of the most hated stocks on Wall Street, and when we bought it for the first time in 2013, an outraged client wrote me an email calling our purchase “irresponsible” – which motivated me to write not just one but two articles on Apple (one, two). As I discuss in the following article, for a value investor it is easier to love stocks that are hated and more difficult to love stocks that are loved. Love is usually expensive, and the infatuation gets reflected in a company’s valuation. Hate, or near hate, is cheap.
Being contrarian – taking a position that goes against the grain of commonly held opinion – is not easy and not comfortable. Humans take comfort in consensus. We love it when the crowd agrees with us. However, being contrarian for the sake of being different is idiotic and dangerous. People don’t normally step in front of moving trains; being contrarian in this regard would make little sense. When it comes to investing, being contrarian means trusting and following through on the findings of your research, whether you agree or disagree with the crowd.
Bucking the crowd is rarely comfortable even for seasoned contrarians. Think of it this way: Brave people are not the ones who don’t have fear but the ones who can overcome it. When you’re making a contrarian decision, it’s not like you won’t have a tingly, discomfiting feeling in your stomach. You will. This is the time when you need to have a healthy dose of arrogance; yes, this is when you need to stick with your research and basically say “The crowd is wrong; I am right.” I have talked plenty of times about the situations in which you need to be humble, but there are times you need to be arrogant, too. And the tricky part is to know when to be which.
Recently, I felt the same tingly, uncomfortable “contrarian” feeling when we were selling the bulk of our Apple stock as I did in 2013 when were buying. Then we could not kill the stock; today … we can.
I shared a draft of the following article with a friend. He said “You’re probably right, but Apple is going to $180 first.” There is little value I can add there. Let me tell you where I could be wrong: India may prove to be a very fruitful market for Apple. iPhone penetration there is very low, Apple is building new stores, and India has a billion-plus people. The problem with this argument is that India is a very poor country. Half of its population doesn’t have indoor plumbing, and a third doesn’t have electricity. Therefore, for a long time, Apple will be an aspirational brand for a very large part of the Indian population.
