Apple: Shall we buy Apple during WWDC?
WWDC events normally announce exciting products of Apple for the fall term. However, investing for WWDC does not generate positive returns. Instead, the best investment strategy is to invest into Apple during WWDC and hold until the iPhone announcement. Such a strategy has provided an 80% win rate in the past 10 year. After consideration of fundamental factors, we believe this is an attractive investment strategy for our portfolio.
WWDC investment strategy delivers less than 50% Win rate
Apple will hold the flagship annual developer event “2021 Worldwide Developers Conference” from June 7 to June 12. In every WWDC, Apple normally announces new iOS and other new products. While technology enthusiasts are excited, is it rational to invest for the WWDC event? Our study on the last 10 years of WWDC is that the win rate to invest for WWDC events was only 40%, and the expected return was -0.53%. Thus, although investors are positive on products announced during WWDC, rational investors will buy more Apple shares only when they can quantify the potential positive revenue impact on new products versus market expectation. And normally, that process last longer than one week.
If that is the case, shall we buy right before the iPhone announcement? However, our study in the last 10 year case shows that the win rate to invest on iPhone announcement was even worse, with only 20%, as investors will normally invest earlier before the actual announcement date.
Thus, the best investment strategy is to buy Apple during WWDC and hold it until the iPhone announcement date.The win rate of such strategy is 80%, based on the past 10 year data, and the average return of such strategy was 12.5% for around 3 months holding. Thus, investors took time to understand WWDC strategy, listen to 2Q result management comments and accumulated Apple throughout that period. The two losing years of such strategy was:
- 2015: investors were unimpressed by the iPhone 6S and iPhone 6S Plus models, coupled with the 2015–16 stock market sell-off, resulting in a 10.82% drop in APPL return after the iPhone announcement.
- 2017: The 2.29% drop in APPL return after the iPhone announcement could be explained by market disappointment towards the minor upgrade of iPhone 8 and iPhone 8 Plus over their previous models of iPhone 7 and iPhone 7 Plus.
In the year 2021, we believe this investment strategy remains attractive because:
- 5G upgrade cycle has not completed
- Potential M2 announcement to improve processing speed and iPhone margin
- Lack of competition in the high end smartphone market after Huawei sanction
- Economy upcycle after pandemic
- Other potential new features of new iPhone, e.g. AR
The key risk is Epic Game lawsuit decision during summer and surprise Fed tapering in 3Q21. After considering all factors, we believe this strategy (investment into Apple from WWDC to iPhone announcement) should be a profitable strategy for our portfolio.
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