I’ve mentioned the magazine cover indicator
several times in the past. I find its utility to be greater when
discussing major trends and events — Oil, Real Estate, Markets — than
any specific stock. As investors, you should pay much closer attention to the big picture when major magazines tout fairly known trends on their covers.
These are what tend to get top ticked — not individual stocks.
For example, Time pretty much caught the top in Real Estate this past June (Fortune’s Housing cover was only a month earlier), while Forbes nailed the top in the Technology recovery (Tech is Back!) on February 05, 2004. Recall that Time top also ticked the internet bubble, naming Amazon’s founder Jeff Bezos as its man of the year in December 1999. Indeed, the mother of all magazine cover indicators was when Business Week nailed the bottom of the Bear Market with their infamous Death of Equities (August 13, 1979) — just before the beginning of an 18 year Bull market.
It seems to apply to politics as well. Time pinpointed the peak of Howard Dean’s Presidential run. They may have even top-ticked the GOP back in April of this year, putting a certain shrill blonde harpy on their cover.
Courtesy of Time
So how does this play out with individual firms? I noted that Apple was on the Cover of Fortune back on February 14, 2005. Here’s how the stock has done since then:
click for larger chart
Source: Stockcharts
Not exactly armageddon, is it?
Source:
How Apple Does It
Conventional wisdom says its strategy is wrong, yet it keeps turning out great products. TIME looks inside the world’s most innovative company
LEV GROSSMAN
Time, Posted Sunday, Oct. 16, 2005
http://www.time.com/time/magazine/article/0,9171,1118384,00.html
Apple, after all, is the contrarian company!
Hello Barry Ritholtz,
Seen the related article devoted to prediction markets? The PM bubble is coming. Real fast.
http://www.time.com/time/magazine/article/0,9171,1118373-2,00.html
Best regards to you and your readers,
Chris. F. Masse
There’s an interesting article on Slate that talks about how the cult of Apple is propagated by the media.
Given the continuous coverage of Apple in the media, I’m cautious in saying that this new TIME cover could mark a downturn in Apple’s fortunes. What could be more damning to me is that Apple seems to be forgetting that it’s a computer and not a music company at heart. Therefore, neglecting its computer business and focusing on music could be a warning sign. I’ve commented on this phenomenon at greater length elsewhere if you too are skeptical of Apple’s fortunes going forward.
“continuous coverage of Apple..”
If you would do just a little research you would see that Microsoft gets 2x to 3x MORE media coverage than Apple. Please don’t try to make an arguement that Apple has tricked the media into covering them, or that Apple has been unfairly covered in the media, it’s not true.
“neglecting its computer business and focusing on music…”
As of right now this is a boring point, only Microsoft is the exception here – Forbes reports Microsoft has lost $4 billion so far with their Xbox, and Apple has made money with their music operations (iPod), yet their doomed to fail. Interesting.
First, Emmanuel said:Given the continuous coverage of Apple in the media, I’m cautious in saying that this new TIME cover could mark a downturn in Apple’s fortunes. What could be more damning to me is that Apple seems to be forgetting that it’s a computer and not a music company at heart. Therefore, neglecting its computer business and focusing on music could be a warning sign. The contrarian indicator of magazine covers is fully overblown.
In fact, it’s our best re-reading of an earlier trope that manifested during the Depression.
I forgot who said it, but one luminary advised: If your showshine boy is pitching you stocks, sell everything.
Today, showshine boys are approaching obsolescence, so we use magazine covers as cause to blow out a position…
Interesting trajectory…
Second: I have a problem when Emmanuel says that apple is at heart a computer company.
What?
C’mon — your’e denying Apple it’s core asset — the art of self-reinvention.
Apple is no AT&T (remember when those dummies bought NCR and McCaw?) — it has branched off into other businesses, struck the right note, and found gold.
And Apple is loved (not because they collude with the media, as Tim rightfully points out) but because they embody something truly American: the art of change and mutability.
They also kick as at marketing — that ipod campaign dropped on us like a sumo wrestler.
I recall when the Media was bleating daily about Apple’s imminent demise. That was with the origianl iMacs, which were a huge smash hit.
Rememebr, Microsoft is a 260Billion company, while Apple is a $40+B
Up until recently, Apple was a $20 or $30B firm — so it makes sense MSFT would get more press . . .
I think key is that Apple gets way more POSITIVE news than Microsoft – I can’t remember the last time I saw a positive story about Microsoft, whereas everything Apple does is looked on as fantastic – not unlike, say, Google.
Also – Apple isn’t loved because of change or mutability in my opinion – they are loved because they have embraced counter-culture esthetics (that’s the good marketing) and because they make very good, very simple and very attractive products.
I think it would be interesting to look at brand power and stock multiples – I think you would find that the most powerful consumer brands are given multiples way beyond their peers.
The predictive thing is a bit skewed with Time and Apple, because they seem to have a relationship – often, when Apple comes out with something, Time comes out with a feature about it which implies the reporter was in on the story before release.
In other words, when Apple shows up on Time’s cover, it’s not because Time is doing some lagging trendspotting, covering the zeitgeist. It’s because Apple’s PR people specifically set it up.
Now, if Apple shows up on the cover of your Parade supplement on Sunday…