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4 Investment Lessons for Financial Success from Apple

Imagine  that you own a company that makes more money in a quarter than GDP of 105 countries on this planet – GDP of Tunisia or Slovenia, and the islands of Jamaica, Iceland, The Bahamas, Haiti, St. Lucia, Maldives, Antigua/Barbuda and Grenada — combined.

Before you nod your head in disbelief, you can do it! Here’s the scoop — buy even few shares of Apple.

Some noteworthy, exemplary facts to know:

  1. Apple’s $46.3 billion is also just under Bulgaria’s estimated GDP of $47.7 million for all of 2010, and is larger than Iceland’s 2010 estimated GDP of $12.59 billion.
  2. The company reported that it sold 5.2 million Macs during the first quarter of the fiscal year, which represents a 26 percent year-over-year growth rate in a PC market that, as a whole, is on the decline.
  3.  Top-line revenue shot up to an astonishing $46.33 billion, a 73% rise from the prior year’s $26.74 billion. Gross margin jumped from 38.5% to 44.7%. Net income soared by 118% to $13.06 billion, which turns out to $13.87 per diluted share

 

These amazing earnings stats from Apple not only prove that a company can rise from ashes and make awesome products that the entire world loves, but also prove that you can learn to profit from this transformation.

All it takes is an intense desire to learn from the history and apply the knowledge to find an awesome company.

In fact, most investment lessons that you can apply to find a great investment relate to principles that are dear to all of us in the world of personal finance  —  owe no debt, have lots of cash, deliver incredible products or services.

1. Apple has no debt

It’s great that Apple has no debt yet it is the largest company in the world in terms of market capitalization. And, Apple sits on incredible amount of cash. This is the direct result of one and only one thing — delivering awesome products, far superior than its competitors.

As an investor, invest only in the company that dominates its niche. It has to be the top dog by wide margin.  Apple proves that it is the top dog by its sales growth overseas — sales in Japan jumping by 148%; Europe and Asia Pacific were neck and neck with 55% and 54% revenue growth, respectively.

We all know that prime motive for anyone seeking  financial freedom is to become debt free. Debt free life allows you to pursue your life purpose without worrying about money to keep up your lifestyle. That applies to these invisible companies as well. Apple can maintain its dominance by innovating and delivering amazing products without worrying about incurring any more debt.

2. Apple is stupendously rich

Apple is stupendously rich with $97.6 billion in its coffers. Cash is king. Companies with huge pile of cash can easily have a major competitive advantage over those that are in debt. In fact, if you consider over $100 per share in cash that Apple has, it is a stock Warren Buffett would love to buy. And if Apple decides to pay dividend then it will attract a slew of investors to grow its fan base. Or Apple can acquire companies that fit well with its growth strategy.

3. Right brainers will rule the world

This is the most important investment lesson I learned by investing in Apple. If you revisit 1996 — Apple was facing financial crisis. It was on the brink of bankruptcy. I still vividly remember watching news that Steve Jobs borrowed money from Bill Gates to spring life back into the company he created years ago.

Steve Jobs was a creative genius. And, it is apparent — from Apple’s incredible journey so far since he took over its rein in 1996 — that amazing things happen when you start using your right brain. His imagination created a new market for products that are making a great deal of money for Apple — iPhone, iPad.

Apple’s success lies in its ability to create  products that are not good or great but simply awesome.

4. My personal finance lessons from Apple

As a devout personal finance student, I try to apply investment lessons learned to  improve my financial habits.

With Apple’s stunning rise,  akin to a rise from ashes of the Phoenix, I believe that you can achieve amazing financial feat by committing to — become debt free; save money by being frugal; and, most importantly, use your right brain to deliver awesome product or service that the entire world loves.

It remains to be seen if Apple can continue this saga without Steve Jobs. So, as an investor, never stay too complacent. Companies have life cycle like humans do. Some die right after the birth, and some achieve amazing success by making awesome products, but all good always attracts more competition. So, somewhere in this world, I am sure that another Steve Jobs has born to pose challenge for Apple.

These investment lessons led me to believe that you can become financially astute by investing in a company that — is the top dog in its niche; has no debt; has a pile of cash; and, runs by right brainers. That’s the simple recipe for success.

What you’ll read now is very profound for your personal growth. It proves that anything is possible with focus and dedication.

I really didn’t know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down – that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me  I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

Steve Jobs, about getting fired from Apple,  at 2005 Stanford University commencement speech

I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don’t settle.

Steve Jobs, reflecting on his comeback success with Apple,  at 2005 Stanford University commencement speech

 

Now, do you see nexus between your financial freedom and personal growth? I’d love to know your thoughts.

 

Comments (19)

Wonderful article, and very inspiring. Great lessons from the most innovative and creative company in the world.

Jim,

Thank you. Apart from Apple’s earnings, what amazes me is the power of imagination. Steve Jobs changed the world with his imagination. I think all of us have same gift; we need to believe in our own ability. We can do anything that we conceive and commit to achieve.

Nice distillation about Apple’s performance and what was the key to it. I try to keep away from investing until lately. It becomes more and more interesting if not viable option for me, so tips like this article are helpful, thank you.

Alik,

The best part of capitalist system is that everyone can invest in best of the companies to become wealthy. 🙂

Apple’s growth rate and financial positions are stupendous. It’s hard to hold a candle to what they have accomplished. I do think there are plenty of lessons we can gather from Apple. I love that they have no debt. Thanks for reminding me of that fact!

It’s hard to fathom the fact that a man with vision can create wealth of this incredible magnitude. It shows the power we all have to exercise and get whatever we want out of this beautiful life.

Shilpen
Very good article. Inspiring.
Keep writing.

Thank you Hemant for the kind words.

I love that Apple is so cash-rich. But I wonder if its stock is overvalued?

Apple now has $104 cash per share. So, if you deduct that amount from the current stock price of $447, stock is currently trading at $343. At that price, Apple is trading at trailing P/E ratio of less than 10. That’s way safe for a company that’s growing EPS at more than 68% for last three years. But, you should invest only if it fits your investment style.

Great article! Apple is a company we can all learn a lot from, both financially as well as professionally. My only gripe with Apple – that I didn’t buy more of their stock last year when I had the chance!

Indeed, we can learn a lot from Apple’s history for our own personal and financial growth.

Above all, Apple has no debt (like you mentioned). Especially in recessions, cash is king.

Rick,
I am a big fan of Peter Lynch and his simplistic view of investing. I love Apple because I love iPhone, iPad2 and Macbook Pro. And, I love companies with loads of cash. 🙂

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