Our SMC Strategy for Investing in Apple, Inc. Shares
Here’s our SMC Strategy for Investing in Apple, Inc. Shares
This market has been very reluctant to reward Apple its true value. On March 5, 2010, we published a multi-page report on Apple on the eve of the iPad launch and on the day that Apple closed above $215/share. The stock had finally pushed ABOVE its 2007 highs, on volume. We identified that moment as the point to invest in Apple, for those who were not yet on board. We are now 1.5 years beyond that point, and Apple shares have not quite doubled from that March 5th moment, yet the company has re-defined personal computing with the iPad, established an incredible lead with their iPhone, and continue to convert customers to other iMac products and to the Apple store. Earnings are very strong and getting stronger. We have yet to see an exponential run in the stock, which I would normally expect. I announced the sale of my shares at $404 due to reasons of market turbulence and subtle price action in the Apple shares. A move back above $410-$412 in the stock will get me back on board, or on strong weakness and a recovery pattern.
If the market was not behaving so poorly, I expected the exponential run to begin soon – now that the overhang related to Steve Jobs’ health has been completely removed. Catalysts like this (Steve Jobs’ resignation and implementation of an excellent succession plan) often bring forth the buyers who have been waiting for an “all clear” signal.
The Amazon.com hand tablet is a distinctly different device than the iPad, but the $199 price point will perhaps cut into Apple’s momentum on the iPad. We don’t know yet. Earnings are going to still be extremely strong at Apple. If Apple, Inc. is able to break the $30/share annualized earnings threshold, at these prices the stock is selling for a P/E of 13, yet their growth rate is very strong – and merits a much higher price. That is why so many brokers have put a $530-$550 price tag forecast on the stock.
Today’s action in Apple is certainly related to Amazon.com’s announcement yesterday of the Kindle-Fire. At the same time, forensics are being continually done on the Apple, Inc. supply chain related to their Foxconn manufacturing volumes to detect if the global slowdown is affecting Apple at all. It may be that some are concerned that volumes may drop near term? Things are very unusual globally and risk capital has been – for the moment – withdrawn from the table. The idea that China may not meet its GDP forecasts, the European sovereign debt issues, and uncertainty as to whether the U.S. will enter a recession sure has the market tied-up.
What is a person to do? Two viable options = Put the shares in a drawer and not look at them until the stock hits $500-$700 (hopefully) – and put a stop/loss in at a point where it is no longer appropriate to hold the stock based on personal preference – or- sell now and wait to see if buyers emerge to push the shares back above $410 (combine this with buying back the shares on significant weakness – if it occurs.)
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