FINANCE GURU: Here's Why I Dumped All My Shares Of Apple

aswath damodaranAswath Damodaran, NYU

Photo: Bloomberg Television

NYU finance professor Aswath Damodaran literally wrote the book on investment valuation.He started buying Apple in 1997 at around $5 per share, reports Bloomberg.  So, he’s done quite well for himself.

And he just announced that he dumped all of his shares.

“I didn’t sell it because I thought Apple was overvalued or Apple had gone up too much,” he told Bloomberg Television this morning. “I sold for a very strange reason.”

Damodaran is a disciple of intrinsic value investing.  When he thinks other forces are driving asset prices, he heads for the exits.

“I sold because I’m very uncomfortable with the other people who are holding Apple shares right now. The new investors of Apple scare me.  They’re momentum investors.  They’ve shifted the game.

Once stocks become a momentum play, intrinsic value goes out the window,”  he said.

Apple’s new dividend is the latest wrinkle that has complicated things even more.  It has created a new class of Apple shareholders: dividend growth investors.

“They want a very different thing from Apple than from the rest of the investors in Apple,” he told Bloomberg.

Damodaran has been vocal about this risk long before Apple announced its dividend.  “If Apple initiates a dividend, the demands for increases in those dividends in future years will come and the company will find itself locked into a dividend policy that it may or may not be able to afford,” he wrote in his blog.

“You can’t keep everybody happy.”

He thinks that yesterday was a great example of how things can go wrong for Apple.  When the S&P 500 was flat, Apple tumbled: “There was no real news story, but the stock fell 5%.”

“I don’t understand the rules of this game”

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