Investment lessons from a mystery tech company

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(MoneyWatch) This company was founded by two technology pioneers in Silicon Valley. With strong ties to Stanford University, they created a company from scratch whose innovative and disruptive technology would make the company a household name across the globe.

Nearly every hardware product launched by this company in the past few years has been a smashing success. Although investors buying the company's stock have made a fortune over the past 20 years, Wall Street analysts still say the shares are undervalued and only good times are ahead for mystery business.

For those guessing that the company in question is Apple (AAPL), I'm actually referring to Hewlett Packard (HPQ). More specifically, it's HP circa 1982. Fast-forward 30 years and, even with the 2001 acquisition of Compaq, HP's market capitalization is less than 5 percent of Apple's. HP shareholders have lost 87 percent of their investment since the turn of the century, and analysts are no longer so kind to the company.

Tricks of the trade

Did I try to trick you? Of course, but only to illustrate just how capricious and uncertain the future is, particularly in the area of technology. The odds of Apple becoming tomorrow's HP in the next 30 years are far greater than people think. I'm willing to bet that no one in 1982 predicted the devices like the iPad and iPhone would turn HP into declining legacy provider desperately trying to play catch up. (In fact, Apple didn't even go public until 1984.)

That is not to say that I am advising you against owning Apple stock. But I am advising against putting all of your apples in the company. Though I own more Apple shares than any other stock through my total stock index fund, I'm also hedging my bet and plan to own the next Apple as well. Considering there was a time when Apple almost went bankrupt, the next Apple might even be HP.

  • Allan Roth On Twitter»

    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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