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Apple at $500: Big deal Add to ...

What does Apple Inc. at $500 a share mean to you? Judging from the widespread coverage of this milestone, it must mean a lot of things. It means that the company is now by far the world’s largest, based on market capitalization, widening the gap with Exxon Mobil Corp. ; it means that the gap between absurdly high Apple earnings and a curiously low stock valuation is starting to close; and it means that bullish analysts have been proven correct.

But, let’s face it, the $500 price tag largely serves as an illustration of why Apple has been the stock to own over the past decade. From its low in 2003, the share price has grown 76-fold – meaning that if you had had the audacity to invest $10,000 in Apple before iPods, iPhones and iPads had begun to make a big impact on the company’s fortunes, your own fortune would be worth $760,000 right now. Not a bad haul for a single stock.

But if you’re looking for a reason to ignore the $500 milestone, here’s one: The stock’s tremendous gains from the 2003 low distort the overall picture because they assume too much foresight on the part of investors. There are any number of investments – more conservative investments – that have outperformed Apple over certain periods.

As Eddy Elfenbein points out on his blog, the S&P 500 rose six-fold between 1983 and 1997, when Apple’s share price declined. And since early July 2009, Caterpillar Inc. has outperformed Apple by about 25 percentage points.

Meanwhile, my colleague John Heinzl noted recently that Canadian investors would have been better-served with an investment in boring Enbridge Inc. over the longer term. Over the past 20 years, Enbridge has risen a total of 2,421 per cent, after dividends are included – about equal to Apple’s return over the same period, when calculated in Canadian-dollar terms, but with far less volatility.

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