In an era where passive investing through tracker funds has gained immense popularity, the art of stock picking remains alive and well. This sentiment is echoed by seasoned investors who continue to find value in selecting individual stocks, such as Apple, over the past decade. While tracker funds offer a simpler and often more cost-effective entry into the stock market, they are not without misconceptions.
It’s important to clarify that there is no inherent opposition to tracker funds. In fact, they were advocated by Richard Branson in Britain as a novel way for those uninterested in the intricacies of individual assets to participate in the stock market. During a conversation in the garden of Branson’s Holland Park mansion, the billionaire emphasized the untapped demand for such funds from those unwilling or unable to follow the stock market closely.
The Tracker Fund Debate
Tracker funds are often lauded for their ability to outperform the average actively managed fund. However, the term “average” can be misleading, as it encompasses numerous unit trusts that rarely top performance tables yet continue to be sold to uninformed investors. This phenomenon underscores the importance of understanding the details when it comes to financial investments.
Last week’s market fluctuations highlighted why many investors prefer the stability of tracker funds. Two tech giants, Microsoft and Meta Platforms, reported rising revenues. Yet, their share prices reacted differently due to market uncertainties surrounding their investments in artificial intelligence. Microsoft’s sales surged by 17% to $81 billion, but a 66% increase in capital expenditure led to a share price drop. Meanwhile, Meta’s sales jumped 24% to $59.9 billion, and despite plans to nearly double capital expenditure, its share price rose.
Investing in Technology Giants
The allure of technology stocks, particularly those investing in AI, is undeniable. My own investment journey with Microsoft began in January 2023, driven by the excitement surrounding AI. Despite market fluctuations, Microsoft’s shares have appreciated significantly, reflecting the company’s stronghold in software and gaming industries.
Similarly, Meta and Microsoft are key holdings in the Polar Capital Technology Trust, an investment vehicle offering diversified exposure to the tech sector. This trust has been a part of my portfolio for over a decade, providing a professionally managed approach to navigating the complexities of the tech industry.
The Apple Experience
Among my investments, Apple stands out as a ten-bagger, a term used to describe stocks that have increased tenfold in value. My journey with Apple began nearly 40 years ago, with the purchase of my first computer in 1990. Despite skepticism from peers, I recognized the potential of Apple’s products early on.
Investing in Apple shares at the equivalent of $23.75, adjusted for a stock split, has proven to be a lucrative decision. As of Friday, Apple’s shares were priced at $256, making them the second-most valuable holding in my portfolio. Apple’s recent financial performance, including record iPhone sales and a 16% increase in global revenues, underscores its enduring appeal.
The Future of Stock Picking
Equity investment is fundamentally about owning a share in the future, becoming a part-owner of businesses that provide goods and services yet to be imagined. The stock market, while fraught with risks, offers substantial rewards. This is evident from both personal experience and broader market trends.
While pooled funds, whether active or passive, can mitigate some risks, the potential for life-changing rewards remains a compelling reason for investors to engage in stock picking. As the market evolves, the debate between passive and active investing will continue, but the enduring appeal of stock picking is unlikely to fade.
In conclusion, the journey with Apple and other tech giants illustrates the potential of stock picking. As investors navigate the complexities of the market, the lessons learned from past experiences will guide future decisions, ensuring that stock picking remains a vibrant and valuable approach to investing.
