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Rotten Predictions Based On The Past

26 Nov 2012 9:43 AM -
Apple and Microsoft, both big names in technology, have both experienced phenomenal growth since becoming publicly traded companies in the 1980’s.
 
While Apple struggled to offer shareholders much of a return in its first few decades, it has really turned on its growth engine over the past ten years.
 
In contrast, Microsoft’s explosive growth from the mid 80’s to late 90’s hasn’t been replicated over the past decade.
 
Looking back over the past ten years, had you invested $10,000 into Apple it would have grown to nearly $700,000 (adjusted for dividends), while $10,000 into Microsoft would have barely made it to $13,000.
 
However, had that $10,000 been invested in Microsoft from their listing in 1986 it would have grown to over $3 million by 2002.
 
A decade ago there was no questioning the better company – it was Microsoft hands down.
 
But was it going to be the company that could produce significant growth?
 
Unfortunately, when many analysts make their forward predictions they’re often looking in the rear view mirror because those predictions are little more than guess work.
 
In June 2002 when Microsoft was trading at $51, Credit Suisse rated Microsoft a ‘strong buy’ with an $89 price target.
 
Over the next decade Microsoft never traded anywhere near $89.
 
Credit Suisse wasn’t alone at the time, out of 27 Wall Street analysts, eight rated Microsoft a ‘strong buy’ and thirteen a ‘buy’.
 
In contrast, Apple was being pummelled.
 
A portfolio manager at investment company Transamerica noted in 2001, “Apple will remain a company that is neat from a product and consumer standpoint but crap from an investor standpoint.”
 
Further, their strategy of Apple Stores was viewed as a marketing blunder.
 
As David Goldstein of Channel Marketing Corp suggested in 2001, “I give them two years before they're turning out the lights on a very painful and expensive mistake.”
 
At the time the share price was $12, while earlier this year it peaked at over $700!
 
As always, predicting the investment future is extremely difficult, even more so when you believe a company can only ever continue to replicate its successes or failures.

It’s never too early to invest in your future