The smartphone or the smart call
Like anglers, investors lament the ones that got away, writes Susan Edmunds.
Everyone who takes a punt on the sharemarket holds out a twinge of hope that they might put their money into the next big thing. You dream of being the type of person who put a sneaky $1000 down on Apple in 2006, say, or, on a local level, piled into The a2 Milk Company in 2015.
But picking a winner is never easy and even those who make their living trading the markets miss opportunities.
We asked local experts what they wished they had put their money on.
Apple
One of the biggest misses for many investors is Apple.
‘‘The smart decision 10 years ago would have been to forego your 8GB iPhone purchase and instead invest the US$600 purchase price into Apple shares,’’ said Pathfinder Asset Management’s John Berry.
He said the 780 per cent growth the stock had experienced over the decade, or 24.3 per cent per year in US dollar terms, meant someone who bought Apple shares 10 years ago worth US$600 could now buy a 128GB iPhone 7 for $1399 and still have more than $6000 left invested.
‘‘On these numbers, the lesson of the decade is we should have bought Apple’s shares, not its phone. But could we have survived the last decade without a smartphone?’’
Clayton Coplestone, of Heathcote Investment Partners, had the same regret. ‘‘On May 14, 2007, you could still buy the stock at US$14.40 per share. Today Apple is priced at US$153 a share, with US$250 billion sitting in the bank.’’
Even Warren Buffett, one of the world’s richest men, was late to the Apple party. Berkshire Hathaway first revealed a stake in the company last year and has been piling in since.
a2 Milk
Locally, one of the star performers of recent times has been The a2 Milk Company. It tracked along with a share price at about 50 cents until 2015, when it shot up.
Mark Lister, of Craigs Investment Partners, said someone who invested $100 in a2 Milk 10 years ago would now have an investment worth $3381.
‘‘A2 has been the star of our market, although I should say the bulk of this return has come in the past 18 months,’’ he said.
Amazon
Another international tech performer, Amazon has returned 1530 per cent in 10 years. If you invested $100 in the stock 10 years ago, it would be worth $1630.
It’s another one Buffett missed out on gains with. At his recent shareholders’ briefing, he admitted he had been too slow to spot the potential of tech stocks such as Amazon. He said he could have been quicker to spot Google and Amazon’s potential.
Other local options
Lister said there had been a number of shares that significantly outperformed the NZX 50 index and even Auckland house prices over the past 10 years.
The sharemarket index rose 75.9 per cent over the past 10 years, while Auckland’s median house price was up 100 per cent, according to the Real Estate Institute.
‘‘On these numbers, the lesson of the decade is we should have bought Apple’s shares, not its phone. But could we have survived the last decade without a smartphone?’’ John Berry of Pathfinder Asset Management
But Auckland International Airport was up almost 300 per cent, while Ebos Group and Restaurant Brands New Zealand were up 636.5 per cent and 991.5 per cent respectively.
‘‘Interestingly, these are all good quality, blue-chip businesses, which is proof you don’t necessarily need to pick highflying risky companies to do well in shares,’’ Lister said.
‘‘Simply investing in good solid businesses that are well-managed and sticking with them is a recipe for success. I’m quite confident that, over the next 10 years, all these businesses still have a bright future.’’
Picking future performers
If we can identify what we should have bought 10 years ago, how can we use that to help us decide what might be the Apple of 2027?
Coplestone said investors should avoid the hype and what experts were saying and invest in products and services that made sense to them.
‘‘If you believe that electricity will increasingly be the fuel of the future, then there isn’t much point investing in petroleum-producing companies,’’ he said.
‘‘A great piece of advice that I received when I was doing portfolio papers at uni referred to the ‘pillow test’. Basically – if you can’t sleep at night, then you’re in the wrong investment.’’
Lister said some investors would get lucky but those who did not want to rely on that could opt for a well-diversified portfolio instead.
‘‘If you do that, chances are you’ll have an Apple or a Ryman [Healthcare] or a Mainfreight in there somewhere.’’
George Carter, of Nikko Asset Management, said there was an argument for sticking with the safe bet, too.
‘‘I rarely look at individual companies and have only purchased a handful over the years; my preference being to keep paying off the mortgage, which is kind of like having a risk-free, after-tax return of your interest rate, so feels like the best riskadjusted return available,’’ he said.
‘‘I’m also pleased I chose to be in a high-growth KiwiSaver account. But at an individual stock level, for all those that got away, there are plenty which also turned out to be disasters, so all up I’m happy to leave the stock-picking business to others and I’ll stay with managed funds.’’