Why Apple Stock Is Better Investment Than a House
Warning: This article may cause you to a punch a hole in your drywall.
In 2002, if you had purchased Apple stock instead of putting the same amount of money into a house, you'd have almost $10 million right now.
That’s based on analysis by TradeMonster.com co-founder Jon Najarian, who took various common assets purchased in our lifetime, like a house, and priced them in Apple terms.
For example, the typical American home cost $228,000 in 2002, according to U.S. census data. With that money, you could have bought 18,704 shares of Apple at their price a decade ago of $12.19 a share.
Today, that home is worth $280,000 and that Apple holding is worth $9,969,232.
“This extreme exercise is not to show people how ‘dumb’ they were, but rather to illustrate how people put too much into their home a decade ago and that maybe they should have diversified their wealth over more asset classes,” said Najarian.
“Right now we should be asking ourselves, 'What will be the most inflationaryasset of the next decade? And how much money should I put towards it,’ ” Najarian added.
“It was Apple and gold over the last ten years, but now will it be Facebook?” said Najarian, a “Fast Money” contributor.
Pricing assets in different terms than U.S. dollars is a common exercise on Wall Street. See all the analysis done regarding purchasing the Dow Jones Industrial Average in gold terms 10 years ago. Your returns — instead of being flat — would have been much higher, given the drop in dollars and rise in gold.
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Other examples Najarian used in his Apple exercise were on energy costs and tuition. Filling your tank for a year in 2002 cost $840 on average, according to the U.S. Energy Information Administration.
“But if you took the bus” as Najarian put it, and purchased 68 shares of Apple ($840/$12.19) instead, you would now own $36,244 worth of the iPhone maker—a nice $35K profit.
Annual board and tuition for a private, non-profit college was $31,000 in 2002, according to the Census Bureau. If you let your child pay his own way and instead bought 2,543 shares of Apple, that stock investment would now be worth $1.36 million today, according to Najarian’s calculations. Tuition now costs $39,000 on average.
Apple shares were volatile Tuesday, a day before it unveils its next generation iPad.
The stock is up 30 percent this year and 500 percent over the last ten years. These gains — as it went from selling the iPod and Macs in 2002 to a halo of sought after personal electronics today — have made it the most valuable company in the world.
For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:00 ET on CNBC. Follow @CNBCMelloy on Twitter.
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