Ernie Varitimos: Founder of Apple Investor ‘The Only Competitor to Apple Over the Next Decade is Apple’

When it comes to Apple and its reach, it’s hard to find consumers nowadays who don’t touch Apple’s products one way or the other.  Apple offers innovative products in multiple arenas, and the consumers love it.  Many of you reading this article are likely fans of Apple products.

Well, Ernie Varitimos is no exception.  In fact, Ernie is so fanatical about Apple and its products that he devotes much of his effort reading and writing about Apple.

Ernie, a technical consultant and a fan of Apple for over 30 years, now manages a financial blog dedicated to Apple.  Through his blog Apple Investor and Seeking Alpha contribution, Ernie delivers his views and thoughts on anything Apple along with technical analysis for Apple investors.

In our interview, I got to learn about the drivers behind his passion for Apple and why he sees Apple as a viable investment platform for the next 30 years.

“So Ernie, what led you to specialize in Apple (AAPL) and follow its movements so passionately?”

Apple resonates with me; I’ve been an Apple fan for over 30 years, having owned nearly 80 Macs in my lifetime. I bought my first Mac the day after it was introduced to the world with the famous 1984 Orwellian Super Bowl ad. I already knew that Apple had great products, but from that point on I knew Apple would be the disruptive leader in personal computing.

Today we have eight Macs in our house. There’s one in almost every room. Oh, and we all have iPhones. What attracts me to Apple and its products is its pursuit of excellence; Apple makes insanely great products, both aesthetically and functionally. Apple products are works of art that perform and make people more productive. The Apple philosophy resonates with me as well. It’s a company that knows and caters to its customers. Apple knows who we are and what we need, usually before we know we need it.

“Can you share more about your career? What’s your educational background?”

Over the past 30 years, I’ve worked primarily as a consultant and technologist in a wide range of industries such as finance, insurance, healthcare, publishing, manufacturing, defense, energy and sales. I’ve been a consultant for at least 25 of those years providing strategic guidance for companies ranging in size from startups to fortune 5’s.

Over the past 15 years I’ve consulted for and built systems for many of the recognizable names in finance like Fidelity, Merrill Lynch, Credit Suisse, Goldman Sachs, TD Water House, GE Capital, etc. Also, for a time I was a chief architect of the northeastern United States for Sun Microsystems. I led a large team of architects and projects, most of which were in NYC, where all the big financial houses were located. This is where I developed my fascination for finance and stocks.

“So how did you get into the field of consulting in the first place?”

It’s funny you should ask because the Macintosh had a great deal to do with it. My first job out of school was with Raytheon, working on defense projects like guidance systems for missiles. After a few years I got bored with that job, but not with technology. I didn’t know what I wanted to do. So I decided to consult and try a number of different things to expand my horizons. So I picked up some books on being an independent consultant and started shopping for contracts. That’s just about the time the Macintosh was introduced.

When I got hold of the Mac, I found for the first time I could create proposals with graphics all on the same system. Sounds pedestrian now, but it was a competitive edge back then. A few years later, desktop publishing was born, and I recognized the huge opportunities for consulting in the field of electronic publishing. So I started consulting with large printers, input/output service bureaus, advertising agencies and communications departments of larger companies. That’s when I recognized that certain companies were well positioned in print and media, and so I started to buy stocks in Apple, Adobe, Compugraphic and others.

As the Internet evolved, so did online trading. I was captivated with that, and saw how important technology was becoming to finance companies. Therefore, I searched them out for consulting gigs. I started with Standard & Poors, then Scudder Stevens and Clark, then Fidelity. Over time, I developed a reputation, and was asked to be chief architect for Sun Microsystems professional services in the northeast. There I had the opportunity to lead a large team of architects working primarily in NYC with some of the biggest finance companies in the world, building trading systems and portfolio management apps. I worked directly with fund managers, analysts and traders. I learned their craft through the course of my project work, and have been developing my knowledge of financial systems, stock analysis, and trading ever since.

“Do you trade stocks other than AAPL? If so, what other companies do you look at? Lastly, what type of trading strategies do you employ?”

Apple (AAPL) gets most of my attention, naturally. But I am constantly scanning for good companies with stocks that have favorable setups. I also trade ETFs and Options that follow the major indexes. I pay particular attention to companies that are part of, or influencers of the Apple ecosphere. They include: Research in Motion (RIMM), Intel (INTC), Google (GOOG), and Adobe (ADBE). I besides that, I keep a close eye on sectors that are lighting up, and so I’ll look at the leaders of that sector, scoping out objective setups.

You can best characterize me as a Swing Trader, although I’ll occasionally Day Trade and scalp. My underlying trading philosophy is very conservative. I like to repeat the mantra, “Capital Preservation First, Maximum Profits Second.” And so most of the time I maintain a large cash position, unless the risk:reward is so skewed in my favor that it makes sense to put that dry powder to work.

The strategy I use is Technical Analysis. I rarely resort to fundamental analysis unless scanning for stocks within a particularly hot market or sector. In these cases, I’ll employ a quantitative analysis to pare down the panoply of stocks and perform fundamentals analysis to pick the leaders, the cream of the crop. I then follow up with Technical Analysis to determine which stocks are setting up into a tradable pattern.

“As you know, Apple has made significant strides in innovation this past decade, and it is benefiting from it. However, Apple is not the only company with creativity and capability. Who do you see as the rightful contenders of Apple in the coming decade, and how are you strategizing appropriately?”

It’s true that Apple competes on several fronts with other great companies. However, Apple is really alone in one crucial and important aspect, and that’s a devoted, fanatical following. I can’t think of a single company that Apple competes with that has a customer base so dedicated. How often do you hear of a Mac user switching to Windows? Never. On the other hand, switchers, or first time buyers of Macs, make up 50% of the customers at Apple stores.

I guess one could make the argument that RIM is a primary competitor to Apple with smart phones, and RIM has a very dedicated following. Isn’t that why people refer to it as the Crackberry? But RIM is mostly a one trick pony. RIM does smart phones and sells them mainly into the enterprise. Apple is so much more. Apple is, or is becoming, a consumer products company with a much wider range of products, and therefore has more stability and growth potential.

When it comes to computers, there are lots of companies out there that go head to head with Apple. But most of them, Like HP, Dell, Lenovo, and others, are becoming nothing more than pushers of commodity hardware. Sure, they try to differentiate themselves from one another, usually by copying Apple designs. However, they rarely compete head-to-head with Apple in specific niches. For example, Apple owns the high-end laptop market with a 90% market share, it owns the MP3 players market with a 75% market share, and it owns the desktop computer market over $1200 with an 80% market share. And of course, Apple owns the high-end smart phone market in terms of revenue, after only 2 years in the business. Also, let’s not forget that its margins are the envy of the industry, allowing them to accumulate nearly $35 billion in cash.

The only competitor to Apple over the next decade is Apple. Should it lose sight of the consumer, lose the ability to innovate, or focus too much on expanding market share rather than simply producing great products, there’s a chance that Apple will be its own undoing. From my vantage point, Apple has not yet come close to reaching its potential. So long as Apple stays true to its values and keep its focus on the customer, not the corporate buyer, it’ll be a great company to trade and invest in for the next 30 years.

“I definitely see your passion for Apple, and we can see it reflected on your blog Apple Investor as well. Speaking of which, what are your goals for the blog, and what can we look forward to going forward?”

Apple Investor is transitioning to a membership site focused on the needs of investors that trade/invest in Apple (AAPL). It’s a focused niche, but it has all the elements to support a successful venture. There are huge numbers of investors that are passionate about Apple stock, and they’re as passionate about the stock as others are passionate about Apple products. They all require information and knowledge that are specific to the industry and markets that affect their favorite stock, and I intend to deliver that to them.

The site will offer commentary through the blog, daily market alerts, online tools and resources, and educational videos on technical analysis.

Over the past two years, I have worked very hard in my spare time to develop a brand: The Apple Investor. That has been realized through social media, such as blogs, iTunes and Twitter, in which I have nearly 50,000 followers. My next big social media push will be video with YouTube and UStream. Over the past few months I’ve been working with several joint venture partners towards a late January launch.

Thanks Ernie for sharing your passion.  For those of you who are or are considering investing in Apple, make a visit to Ernie’s site.  It’s worth a visit.