Is Apple stock AAPL a buy? People ask day in day out in an eager attempt to buy this storied franchise. Apple (NASDAQ:AAPL) has fallen out of grace from a Growth Investor’s perspective, given Apple’s tumult drop from 704 to 420 in 6 months. It’s a heavy loss to swallow especially if you’re the last one to buy in the 700′s. Boy, I hope it wasn’t you. We taught you better than that to chase the stock frenzy. Since February-October of 2012, we heard non stop euphoria into Apple’s price targets to $1,000, new product developments, speculation on the next big thing. Of course the bulls were louder than the bears, but the bears did get garner attention once long term price trend was broken in October 2012. An ordinary investor will never know when to exit a stock until it’s too late.
Investors always ask me “You think it can go higher?” Anything is possible especially when momentum is in favor of the bulls. I always reference this quote by Buffet to remind them before they make a unconscionable decision to buy at high levels. “Be greedy when others are fearful, and fearful when others are greedy” Then of course price drops below your entry price and before you realize it, you’re sitting in heavy losses. I then reference this quote by Templeton “Today you could see that was an obvious thing to do. At the time it was not obvious at all”
In any event, enough of the would of and could of’s. We’re here to learn from our mistakes. We teach you what to look for and when to exit a stock. No one ever loses by taking profits! If you were a buyer from 2009 at $80, Congratulations 800% gain in 4 years. Don’t get greedy stupid.
Here were the tale signs that heavy weights were dumping supply.
- American International Group (NYSE: AIG) replaced the technology stock as the hedge fund industry’s favorite stock in the three months through December 31, the first time Apple had been knocked from pole position in three years.
- Daniel Loeb’s Third Point, for example, got rid of Apple stock in the fourth quarter.
- Barry Rosenstein’s Jana Partners also sold its Apple stake in the fourth quarter.
- Bond god Jeff Gundlach, the CEO of DoubleLine Capital, said on CNBC’s “Fast Money: Half Time Report” today that he sees Apple going to $425 a share next year. Gundlach’s call on CNBC here. He first made the short position in April 2012 see here.
Here’s our current analysis. Is it time to Buy AAPL?
I nailed this with a starter position at 420 and added significantly more upon wedge break-out as noted on chart below. Initial target of 460 was hit and we took some risk off. We continue to see heavy supply above the 460 range. Price action is now consolidating to rebuild its momentum. We’re anticipating (bearing no macro changes to AAPL or unforeseen world economic/tensions) a break above the 460 resistance area to pursue the fill gap zone of 1-24-13.
In the long run, we believe the stock will probably retest the 420 low and build a long base. The stock shall now be viewed as a value play once earnings reconfirm the vigor exponential YOY growth. For now we have to come back to earth and expect normalized earnings. The earnings trend remains very bullish regardless the lack of product innovation or competitors rapidly taking market share away We’re now looking at this stock solely from a value perspective. Can we expect to reach $700 anytime soon? In its current format and product line, I cannot imagine it will hit $700 this year or next. We need the next big thing ~>Apple TV perhaps. I don’t believe the iWatch rumor will be a big hit. Too early to say. I do like however their potential plan layout on the PassPort Book potential with integration of AuthenTec, a mobile security company, purchased for $356 million in July 2012, a move analysts say could help turn the iPhone and iPad into more secure devices for mobile payments. Until then, I suggest to build a position at these current prices. The stock is on sale at a +/- 50% discount.