Apple has had an incredible run of success over the last decade. Its stock currently trades at more than 45 times what it did at the beginning of 2001, and yet it’s still grossly undervalued. Investors love AAPL, and consumers love Apple’s products. It’s a rare balance that not many other companies have been able to achieve.
Funnily enough, Apple’s been able to do it because its values run antithetically to Wall Street’s. It used to be that share price appreciation was indicative of a company performing well and having good long-term prospects, but at some point in time that changed. Now Wall Street is all about stuffing the channel and using phony accounting tricks to pump up quarterly numbers. Wall Street encourages short-term profiteering over long-term stability. As Michael Lewis and David Einhorn wrote in an op-ed for The New York Times: “Our financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense.” But by ignoring all of that pressure Apple has done phenomenally well.
I’d bet that no one high-up at Apple thinks about the company’s share price when they get up in the morning or go to bed at night. Rather than trying to game the system, Apple focuses on making “great products”. Its laser-like focus results in “beautifully designed products that are user centric and work how they are supposed to work” — simple, easy to use products that are so good they sell themselves. It is precisely because Apple focuses on its products rather than its share price that AAPL has gone up.
After all, a watched pot never boils.