Apple (AAPL -0.33%) has become known for launching products that make a splash. That led to large revenue and profit growth that fueled share price gains, creating a lot of wealth for long-term shareholders. The business has a market capitalization of over $3 trillion, putting it in rarefied company.
Narrowing the time frame, how much money would you have if you had invested $5,000 in Apple shares five years ago?
Wealth creator
Apple’s stock, selling for about $50 five years ago, closed Monday at $209 after a pullback following the news that Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) sold about half of its stake in the company during the second quarter. Notably, share prices and returns take into account the 4-for-1 stock split in 2020. That translates into a share price gain of 310% during this time, easily outpacing the S&P 500 index’s 76.9% gain.
You also would’ve collected dividends during this span that would have boosted your total return to 346.5%, more than triple the S&P 500’s 97.9%. Combining the price gain and dividends, your initial $5,000 investment would’ve more than quadrupled to over $22,000.
While you could have sold and locked in nice gains, Apple investors’ patience has been handsomely rewarded. For instance, selling after three years would’ve resulted in a 52% return and you would’ve received over $7,600 in proceeds. That means you would’ve missed large returns over the past couple of years.
Is further patience warranted? Berkshire Hathaway, run by Warren Buffett, well known for his longtime investing horizon, seems willing to take profits.
Apple’s shares sell at a 35 price-to-earnings (P/E) ratio, a premium to the S&P 500’s 29 multiple.
Hence, the market has high expectations for the company’s profitability growth. I’m cautious given Apple faces more intense competition for its core iPhone product, which accounts for about half of its sales. In the latest quarter, iPhone sales fell 0.9% to $39.3 billion.