AAPL bottom in?

  • Posted: 28 August 2010 08:41 AM

    I think so. I have been out of the stock for a while but Friday with 12 minutes before market close I jumped back in with a purchase of a bunch of Sept 240 AAPL calls.
    I think the bottom may be in for the market as well which is what IMO is holding Apple down.  The dramatic spike in yields on the US 10 year treasury bond, the advance of commodity prices like silver and gold holding up with the USD up at the same time suggests sideline money is leaving the crowded long bond room for alternative investments and that means equities which should brighten the Fed’s mood. Also bear Doug Kass has gone bullish last week and his track record on market turns is pretty good.
    What do you think?

    Disclosure: Recent positions

    Long AAPL calls
    Long SLW stock and calls
    Long TBT calls
    Long physical Silver bars and Canadian silver coins
    Long Canada west coast real estate

         
  • Posted: 28 August 2010 10:12 AM #1

    from Todays Barrons.
    bolding is mine

    ‘‘In the past three years, investors have moved unprecedented amounts of money from stocks to bonds, according to the Investment Company Institute. Bull markets typically end after individual investors move massive amounts of money to stocks.

    It won’t take much of a drop in bond prices to send lots of investors back to stocks. And the number of people who can sell stocks is diminishing. The number who might have to buy if the bond market reverses is rising.

         
  • Posted: 28 August 2010 01:20 PM #2

    Agreed.  For AAPL to be at $240 is insane.  If I weren’t already all in I’d be buying.  AAPL is being held down by the general market, which is being held down by general misperceptions of this economy.

    Long AAPL
    Short NOK

         
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    Posted: 28 August 2010 01:43 PM #3

    Zeke - 28 August 2010 04:20 PM

    Agreed.  For AAPL to be at $240 is insane.  If I weren’t already all in I’d be buying.  AAPL is being held down by the general market, which is being held down by general misperceptions of this economy.

    Long AAPL
    Short NOK


    I don’t disagree that AAPL is trading at a discount, maybe 20% fair value…but do you both believe in the over-all market?

    As far as the charts are concerned, there are patterns for bulls and bears, at least as far as I see it.

    Bulls - a possible Inverted Head & Shoulders on a 6-month S&P chart…1040 (left), 1010 (neck), 1040 (right)

    Bears - on the NAZ, an 18 month Weekly Chart looks seriously broken…lower highs, lower lows…closed below an important trend line (granted volume was not heavy). Can the NAZ heal itself?

    AAPL is cheap, but we’ve seen it get much cheaper in the past.  Plus, is Mace correct that Wave 2 isn’t yet complete? I’m still scarred from 08-09.

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    Mully

         
  • Posted: 28 August 2010 02:34 PM #4

    Let’s not forget the stock market is a fairly accurate leading economic indicator. It’s proven itself to a reasonable prognosticator of the economy six to nine months ahead of the economy itself.

    This is a darned nasty recession that is not giving up its grip without a fight. We’re seeing the unwinding of the stimulus programs and the economy’s adjustment to a post-stimulus environment. That’s softening today’s growth. But recessions eventually end and end on their own given time.

    I expect the markets to move substantially higher over the next six months as economic growth slowly rebounds. AAPL should exaggerate the market’s overall move higher.

         
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    Posted: 28 August 2010 02:50 PM #5

    SNIPUS - 28 August 2010 11:41 AM

    I think so. I have been out of the stock for a while but Friday with 12 minutes before market close I jumped back in with a purchase of a bunch of Sept 240 AAPL calls.
    I think the bottom may be in for the market as well which is what IMO is holding Apple down.  The dramatic spike in yields on the US 10 year treasury bond, the advance of commodity prices like silver and gold holding up with the USD up at the same time suggests sideline money is leaving the crowded long bond room for alternative investments and that means equities which should brighten the Fed’s mood. Also bear Doug Kass has gone bullish last week and his track record on market turns is pretty good.
    What do you think?

    Disclosure: Recent positions

    Long AAPL calls
    Long SLW stock and calls
    Long TBT calls
    Long physical Silver bars and Canadian silver coins
    Long Canada west coast real estate

    People are already divesting themselves from bonds in favor for higher yield equities. The idea is that people are willing to forego potential cap gains in favor for keeping what they have but don’t want to hold 10 year T-bills with a 2.62% yield to maturity. Moreover, as boomer retire, they will shift their investment thesis from growth and value to income. As such, high yield equities should experience a bit of a backdraft to the upside anyway.

    [ Edited: 28 August 2010 02:52 PM by Eric Landstrom ]

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
  • Posted: 28 August 2010 02:59 PM #6

    Zeke - 28 August 2010 04:20 PM

    Agreed.  For AAPL to be at $240 is insane.  If I weren’t already all in I’d be buying.  AAPL is being held down by the general market, which is being held down by general misperceptions of this economy.

    Long AAPL
    Short NOK

    I will be going on some margin Monday to average down my Oct 260s.  I think Doug Kass will be proven right that equities will see a recovery off current levels.  Bond “investors” will flee to avoid the bubble there and into equities. 

    AAPL at $240 is indeed insane.  And we may see the bears escaping the asylum to cover their shorts.

         
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    Posted: 29 August 2010 02:38 PM #7

    As money supply is reduced so too are PE ratios. PE ratios meander as they are compressed. John Mauldin’s article “The Dark Side Of Deficits” is the best financial article I’ve read in a month.

    Signature

    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
  • Posted: 29 August 2010 02:43 PM #8

    As money supply is reduced so too are PE ratios

    As we are now in a liquidity trap situation, money supply has very little economic relevance and no effect on PE ratios

         
  • Posted: 29 August 2010 02:51 PM #9

    Hamourabi - 29 August 2010 05:43 PM

    As money supply is reduced so too are PE ratios

    As we are now in a liquidity trap situation, money supply has very little economic relevance and no effect on PE ratios

    There are two factors to consider concerning p/e multiple compression. I’ll be posting an update on my September quarter and FY ‘10 revenue estimates at Eventide this evening.

    There’s nominal p/e multiple compression and p/e compression relative to reported growth. Due to the anticipated jump in September quarter revenue and earnings, we will see a continued compression of the p/e multiple relative to earnings growth. Because the pace of earnings growth is so high, I don’t see compression in the nominal p/e multiple and expect the share price to rise in response to earnings. In other words, the gap between the p/e multiple and the actual rates of growth will expand even if the p/e multiple against 12-month trailing earnings remains constant. I expect AAPL to rise even though the discount to current growth may widen.