Investors are in a frenzy to acquire shares in the Taiwanese firms that are supplying iPhone parts to Apple Inc. (NASDAQ:AAPL), while avoiding commitment to investment in the Cupertino firm itself. The motivator behind this buying pattern is the possibility of quick rises in share values in these small, volatile firms, while Apple’s monolithic stock is unlikely to budge very far regardless of the iPhone 6’s success.
A relatively small supply company will see rapid stock price movement as Apple (AAPL) continues to ramp up orders going into the retail production phase of the iPhone 6’s product life cycle. The investment problem is almost one of physics rather than economics. Apple itself is so huge that its inertia is equally great, and it takes an immense amount of positive pressure to move its stock up even a modest distance. The smaller companies have less inertia and positive results will launch their stock prices toward the stratosphere.
Apple, in effect, is as successful as it can be in the view of these investors. A particularly magnificent period of success might bump its share price up briefly, but a correction would be sure to follow as the massive inertia of the Apple (AAPL) system pulled prices back down to an equilibrium level. The company is already at the peak of its game, and has nowhere higher to go.
A smaller firm, on the other hand, has immense potential for future growth. In the short term, its shares can potentially shoot up by a large percent in a few months, enabling certain investors to cash out. Over the longer term, the money gained from Apple can enable the company to expand its operations greatly, becoming a more powerful player with higher dividends and possibly even higher share prices.
Such is the investment magnetism of the Taiwanese stocks that they are pulling capital away from Samsung, the South Korean tech giant which is one of the most popular alternative investments to Apple Inc. (AAPL) in the electronics world. Investors are drawing down their holdings in the Korean company and using the cash thus gained to purchase shares in Apple’s Taiwanese suppliers.
At the moment, some of the highest returns on investment related to Apple are to be had from buying into these Taiwanese companies, including Foxconn, Largan Precision, and Taiwan Semiconductor Manufacturing Company, Ltc. (TSMC).
