Apple Stock: A Much Better Bet Than Banks

Looking Back, AAPL Is A Clear Winner
Having said the above, I can also understand and support the case for bypassing banks altogether amid all the turmoil and sticking with a stock like Apple. History clearly supports this strategy.
I ran a backtest that goes back all the way to 2005. In it, I simulated a long-short portfolio: 100% exposure to AAPL, -100% (negative) exposure to KBE rebalanced monthly. With this approach, one is effectively betting that Apple stock can outperform banks.
The results were better than I expected to see. This proposed portfolio would have produced massive gains that are uncorrelated with “beta” in the market – in other words, true alpha generation. The chart and table below were provided by Portfolio Visualizer.

The annualized returns of 21% were outstanding, considering correlation with the S&P 500 of zero. An initial bet of $10,000 on AAPL against banks in 2005 would have grown to more than a quarter of a million dollars today.
Notice that, even during the early recovery period from the Great Financial Crisis that started in 2009, Apple stock performed generally better than banks.

It is tempting to bet on banks after their market value has dropped collectively by 40% from the peak. If buying this dip, risk conscious investors might be better off sticking to high-quality and diversification.
But if history serves as a guide, Apple stock may continue to outperform, even if or when bank stocks begin to recover – as was the case in 2009 and the few years that followed. I continue to find AAPL one of the most robust names to hold in a stock portfolio.

Bank stocks are hurting again, opening up an opportunity to buy the dip. Meanwhile, Apple stock behaves as a safe haven and continues to outperform the market. What would you rather own today?