Why Apple will struggle to grow; Why I like Alphabet more than Apple; Chewy falls; Americana: A 400-Year History of American Capitalism; Two cows
1) This review in the New York Times of Apple's (AAPL) new iPhone models underscores why I think the company will continue to struggle to grow: iPhone 11 and 11 Pro Review: Thinking Differently in the Golden Age of Smartphones. Excerpt:
The bottom line? It's time to reset our upgrade criteria...
So now is the moment to ask: Do we really need to upgrade our iPhones every two years?
Based on my tests of the iPhone 11, 11 Pro and 11 Pro Max, the answer is no. Don't get me wrong: The newest models are nice. Apple has made them speedier, improved the cameras and lengthened their battery life. The new lineup also starts at a lower price of $700, down from $750 a year ago, which is a relief in an era of skyrocketing smartphone costs.
But none of this is enough to warrant an immediate upgrade if you have had your smartphone for only two years. The latest iPhones just aren't a big leap forward from last year's iPhones or even the iPhone X from 2017.
So here's what I ultimately suggest: You should definitely upgrade if your current device is at least five years old. The iPhone 11 models are all a significant step up from those introduced in 2014. But for everyone else with smartphones from 2015 or later, there is no rush to buy. Instead, there is more mileage and value to be had out of the excellent smartphone you already own...
The iPhone 11s just aren't enough of an innovation leap to warrant $700-plus on a new smartphone...
Patience has its benefits – and so will breaking free of the iPhone's automatic two-year upgrade cycle.
Overall, it's a positive review, but the recommendation to upgrade iPhones every five years rather than every two has very sobering implications for Apple, which still generates nearly half of its revenue from its hit smartphones.
This is a major reason why I'm skeptical that Apple's stock will outperform the market going forward, and why I recommend fellow tech giant Alphabet (GOOGL) instead. I did an in-depth dive on this in my May 1 e-mail and my article 14 months ago, Why I like Alphabet more than Apple – and Buffett doesn't.
2) Another day, another unicorn stock down after reporting earnings...
Online pet-products retailer Chewy (CHWY) reported second-quarter earnings after the close yesterday and the stock is tumbling, down almost 7% in early trading today. The numbers and guidance were actually solid (and I loved the 20-page shareholder letter), but like pretty much every unicorn, the valuation (around $12 billion) is just too high for a money-losing company. (Over the last year, the company has lost $257 million on sales of $4.2 billion, though it did have positive free cash flow last quarter.)
3) To be a successful investor, you need to have a deep understanding of business. That's impossible if you haven't studied the history of business, so I'm always reading articles and books along these lines.
The latest book I'm reading is Americana: A 400-Year History of American Capitalism, which is an absolutely fascinating history of U.S. business, from the day the pilgrims landed here all the way through today. The Economist named it one of the best books of 2017. Here's a summary:
From the days of the Mayflower and the Virginia Company, America has been a place for people to dream, invent, build, tinker, and bet the farm in pursuit of a better life. Americana takes us on a four-hundred-year journey of this spirit of innovation and ambition through a series of Next Big Things – the inventions, techniques, and industries that drove American history forward: from the telegraph, the railroad, guns, radio, and banking to flight, suburbia, and sneakers, culminating with the Internet and mobile technology at the turn of the twenty-first century. The result is a thrilling alternative history of modern America that reframes events, trends, and people we thought we knew through the prism of the value that, for better or for worse, this nation holds dearest: capitalism.
In a winning, accessible style, Bhu Srinivasan boldly takes on four centuries of American enterprise, revealing the unexpected connections that link them. We learn how Andrew Carnegie's early job as a telegraph messenger boy paved the way for his leadership of the steel empire that would make him one of the nation's richest men; how the gunmaker Remington reinvented itself in the postwar years to sell typewriters; how the inner workings of the Mafia mirrored the trend of consolidation and regulation in more traditional business; and how a 1950s infrastructure bill triggered a series of events that produced one of America's most enduring brands: KFC. Reliving the heady early days of Silicon Valley, we are reminded that the start-up is an idea as old as America itself.
4) Here's an oldie-but-a-goodie that always cracks me up (if you can't read it on the image, here's a website with the latest ones)...
Best regards,
Whitney