Investors often are advised to “buy the rumor, sell the news” — a wise warning that a rising stock often will reverse following a long-anticipated event.
With the latest rumors indicating a late September release for the iPhone 5, investors may be wondering if Apple (NASDAQ:AAPL) will be vulnerable to this type of selling pressure in the weeks ahead. If the history of the company’s past product releases is any indication, the answer is a solid “no.”
The table below shows that the period leading up to a product release is marked by strong absolute returns for Apple shares, and the stock’s recent rally shows that this pattern is holding true once again right now. The one- and three-month periods after a product release have brought more muted returns and a lower frequency of positive results, but the returns are nothing to sneeze at:
| PRODUCT | RELEASE DATE | RETURN, 3 MOS. BEFORE |
RETURN, 1 MO. BEFORE |
RETURN, 1 MO. AFTER |
RETURN 3 MOS. AFTER |
| iPhone | 6/29/07 | 30.1% | 6.7% | 15.9% | 25.8% |
| iPhone 3 | 7/11/08 | 17.3% | -4.6% | 0.6% | -43.9% |
| iPhone 3GS | 6/19/09 | 35.9% | 4.5% | 12.7% | 30.6% |
| iPad | 4/3/10 | 10.3% | 12.7% | 11.7% | 4.3% |
| iPhone 4 | 6/24/10 | 17.2% | 9.0% | -3.6% | 8.7% |
| iPad 2 | 3/11/11 | 4.7% | 0.2% | 15.3% | 20.2% |
| iPhone 4S | 10/14/11 | 18.0% | 8.4% | -10.1% | -0.5% |
| iPad 3 | 3/16/12 | 53.7% | 16.6% | -0.9% | -2.0% |
| Average | 23.4% | 6.7% | 5.2% | 5.4% |
The next question, of course, is how much of these returns came from broader market performance, and how much from Apple itself. But a look at relative performance shows a similar pattern.
In the three months prior to a major product release, Apple has outperformed the S&P 500 — as measured by the SPDR S&P 500 ETF (NYSE:SPY) — by an average of 19.9 percentage points, and it has outperformed in the one-month period by an average of 6.3 percentage points. Apple beat the market in all eight product launches measured for both periods — a 16-for-16 sweep.
Apple’s relative performance dips somewhat after the releases, averaging 3.2 percentage points of outperformance in the one-month period (five times beating the S&P and three times falling short), and 7.8 percentage points in the three-month period (beating six times, lagging twice).
Again, we see a similar pattern to the absolute performance numbers shown in the table above — excellent results, but somewhat less impressive than the returns prior to the product release. Still, most investors would be happy with that kind of alpha.
| PRODUCT | VS. SPY, 3 MOS. BEFORE |
VS. SPY 1 MO. BEFORE |
VS. SPY 1 MO. AFTER |
VS. SPY 3 MOS. AFTER |
| iPhone | +23.8% | +7.5% | +19.4% | +23.8% |
| iPhone 3 | +24.0% | +2.5% | -5.0% | -15.8% |
| iPhone 3GS | +17.6% | +3.8% | +7.4% | +15.7% |
| iPad | +6.3% | +7.8% | +10.3% | +17.2% |
| iPhone 4 | +24.9% | +8.8% | -7.5% | +1.2% |
| iPad 2 | +0.8% | +1.4% | +11.9% | +24.2% |
| iPhone 4S | +23.9% | +5.2% | -12.5% | -6.3% |
| iPad 3 | +37.8% | +13.0% | +1.4% | +2.0% |
| Average | +19.9% | +6.3% | +3.2% | +7.8% |
These results should be taken with a grain of salt for three reasons:
- It’s a small sample.
- Market trends become less reliable as they become more well-known.
- Apple’s market cap is much bigger now than it was in the earlier product launches — which might be reflected in the fact that its post-release relative performance has softened as time has passed.
Instead, the message here is to avoid getting carried away with any discussion that Apple will be a “sell the news” candidate once the next iPhone comes out in mid-September. The historical evidence just doesn’t support it.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.
