An Apple a Day

By July 31, 2020Weekly TGIF

Well, you can see how the Tech Titans wanted to testify on Capitol Hill before they reported those spectacular Q2 numbers. They absolutely blew away earnings expectations. One can only imagine what they were thinking as they got virtually grilled by the representatives in Congress.

Tech has dominated the Stock Market this year and the better part of the last decade. The Tech Titans have been the growth engines. Their stocks were priced for perfection going into earnings. Valuations have been stretched back to 1999. That doesn’t seem to matter. Based on the price action today, Apple must have exceeded perfection. Now that’s saying something. Wow was my response. Just, Wow.

A big key going into today, heading into the weekend, was whether the overall Market could keep the gains. The strength was not broad-based. At one point, it looked like the bottom was going to fall out from the Stock Market. Apple alone accounted for over 240 Dow points today. Without Apple, the Dow would have been down over 125 points. In fact, only 9 other Dow stocks closed positive for the day. There was a period this morning where only Apple was in the green. The other 20 stocks in the Dow Jones Industrial Average closed lower. Have we just witnessed as good as it gets? Stay tuned.

Then there’s this: Apple announced a 4-for-1 stock split. Each shareholder will receive 3 additional shares for every share held on the record date of August 24. It will begin trading on a split-adjusted basis a month from today. Companies split their stock generally to make it more attractive to individual investors. It doesn’t change the value of the company. It’s simple math; Additional shares at a lower price equals the exact same value as the higher priced stock with fewer shares in circulation, on the day of record.

The Apple split is going to have a profound impact on the Dow. Unlike the S&P 500, the Dow is price-weighted. The highest priced stocks have the greatest impact on the index of 30. The S&P 500 is Market Cap weighted. At nearly $2 Trillion in Market Capitalization, Apple is the largest stock in the S&P. At $425, Apple is also the highest priced Dow stock, by a long shot. The next closest is United Health at $302 followed by Home Depot, then Microsoft at $265 and $205. After the split, Apple will immediately drop to 18th in the Dow. It will then have less impact on the price-weighted index.

So far this year, Apple is up 45%. The stock has increased 132 points, which translates to roughly 750 Dow points. The Dow Jones Industrial Average is still down over 2,000 points this year to 26,400. Apple’s gain has added about 3 percentage points to the index’s 2020 performance. That impact is going to be hard to replace.

This Big Apple has some really big numbers. Apple heads into the weekend valued at $1.8 Trillion. Numerically, it is $1,842,000,000,000. That is 13 digits. Another way to say it is $1.8 Million Million. It added over $160 Billion just today. To put that number in perspective, the Starbucks company is worth $89 Billion total. Apple is now the largest company in the world. It just passed Saudi Aramco, the Saudi Kingdom’s Petro conglomerate. Apple has been the largest American company for a while, being the first to reach $1.5 Trillion last year. Amazon and Microsoft are on its heals at $1.5 Trillion each today. Apple reported it now has $194 Billion in cash. With a population of 7.6 Billion on Earth, that equates to $25 per person. The numbers are mind blowing.

Big Tech’s success during the pandemic doesn’t directly translate into prosperity for America. Our nation continues to face serious challenges. There are no signs of progress in talks between Republicans and Democrats over a new coronavirus relief bill. The deadline is today. Members of Congress are believed to be having more discussions over the weekend. Concerns are on the rise about a second wave of the virus in regions that initially neutralized the outbreak. The Midwest and Northeast are showing signs of case increases again. The reopening of America has stalled in many parts of the country. Back to School is facing challenges. There continues to be a wide divide between the US Economy and the US Stock Market. The bumpy ride to November continues.

Have a nice weekend. We’ll be back, dark and early on Monday.

Mike

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