Is Apple ripe for the taking?

Let’s start at the beginning. I grew up on PCs. I switched to a Mac after a month-long search for a computer that could connect to my professional digital camera in 2001. Plug this camera into any PC and nothing; plug it into a Mac and it instantly works. That says something to me. It tells me that the people who made this computer were actually thinking. At this point, Apple (AAPL on Nasdaq) was $30 per share. Unfortunately, I had no money and couldn’t invest.

About a year later, one of my clients and I were talking about where to invest. I told her Apple for sure. She called her broker and he informed her that Apple was on their sell list ($40 per share, if only I had some money!)

Fast forward to August 2011. Married and finally with some extra money to invest! Time to make the slave-master work for me, FINALLY!  Holy shit, Apple is expensive! ($377 per share on August 12, 2011). I buy 45 shares. Up, up, it goes like a rocket.

Time warp to September 18, 2012. After reaching $701.91m the slide commences. What caused it and why is all speculation and of course I have a theory (will get to this below). Every morning, I wake up and I read the news: “Stocks surge to all time highs!”, “S&P 500 touching record levels!”, “Record profits!”. I read that Apple has more cash than most countries, better engineers than NASA, and record sales. So I wonder why my shares are hemorrhaging money. Every day, when I look at the share price I want to sell, but then I remember that I bought GE in the middle of the last depression and in 18 months it gained 46%, which makes me want to buy. Honestly I don’t know what to do but the numbers are so good that I feel like the only way is up. So I am biding my time for some bad economic news and I am poised to strike when the price finally bottoms out.

The Apple slide

I have only been actively trading for two years so I am by no means an expert. But my theory does seem to fit and it does encompass all that I know about humans. There are lots of different kinds of traders, fund managers and metrics that directly and indirectly affect a stock’s price, but because Apple is so prominent and so stable, I believe it is being used like gold as a hedge. Long term investors have little to worry about because although the price is very low right now (personally I am -31% today), it will inevitably rebound. I base this belief on the fact that Apple is sitting on a mountain of cash at the moment and they have the best talent on earth. What I believe is happening to the stock price is this – as the market approaches all time highs, day traders are pulling out of the sure thing (Apple) and trying to eek out a few percent a day on the more risky deals, knowing that if the market falls they can immediately rush back to Apple and effectively shield themselves from losses. I noticed in January that Googles’s (GOGL on Nasdaq) share performance was beginning to mirror Apple’s.

Year-to-date performance comparison for Apple and Google on Nasdaq.

Year-to-date performance comparison for Apple and Google on Nasdaq.

I am not saying that Google isn’t a great company with metrics similar to Apple, but Google is up 15% and Apple is down almost the same. I believe that this trend will continue as long as the market is pushing record highs and as soon as it begins to fall, we will see traders flock back to Apple.

What to do in the mean time? I dont really know and my research tells me that nobody else does either. It seems that the closer we get to the all-time market high, the more contradictory information begins to fill the web. There was some interesting news though: iPhone 6 is going to be transparent. It looks like this came out after market close because I woke up to a -3.1% AAPL. Hopefully, todays price will bounce a little.

 

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