This week Apple set a record when its stock market value reached $623 billion. This topped the prior record set by Microsoft thirteen years ago. The Microsoft record coincided with the mania for technology stocks in the late 1990's, while there is no such mania today.
Yet, there is still a significant parallel between the two. In both cases, at the time of the peak market value, it was inconceivable among investors that such a dominant company would not continue to dominate its field for years to come--and provide continued superb gains for its investors. But after its peak, Microsoft stock has fallen from $59 a share to $31 a share over those thirteen years. It is still a fine company, but has not been a fine stock to own over the last thirteen years.
Similarly, Cisco Systems had a stock market value of more than $500 billion in 2000, when its stock peaked at $79. It now sells for $19. Cisco's dominance has faded, but it still is a highly profitable company.
Unlike the examples of Microsoft and Cisco, Apple stock does not seem expensively valued based on current earnings. There is probably not a more esteemed company in the world today, but the stock price reflects that.
I admittedly was not astute enough to buy Apple stock anytime over the past five years, so these comments may reflect envy more than objective analysis. I am, however, struck by the similarities with other dominant technology companies whose stocks became poor investments.