AAPL: The Day After Blowout Earnings
AAPL: Is it right to buy now? I think the trade for AAPL really depends on what the individual trader’s current position/stance is. Here are my thoughts:1. I agree with everything you guys above have said about AAPL. Nice “strategizing”.
2. The underlying and all-important issue is whether you believe AAPL is going to continue to gain market share. If not, then I think it’s a stock to be avoided. But if so, then I think the multiple (i.e., valuation) is tough to really pin down because of the uncertainty of precisely how much market share AAPL will gain, and the timeframe for that gain.
3. Assuming you’re bullish, I think that you’ve got to differentiate between a “trading” position and a longer term “core holding”. Here’s why: A longer term “core” holding is an investment in the company. You are effectively buying a small piece of ownership of Apple, Inc., using stock as your vehicle. Warren Buffett does the same thing. He buys a piece (or all) of a company via big stock purchases, and then holds it while the company continues to “do what it does”. He lets the employees & management do what they are paid to do. The shareholder (i.e., you and Warren) kicks back in the old Lazy Boy lounger and watches them work…and make money. It is a passive stake in the company. You let it work, zoom out on the charts, and never look at the intraday or even daily price action as a factor in making a decision about that “core” holding.
Conversely, a “trading position” is not really governed by the fortunes of the company (although there is obviously that factor in your original interest in the company — otherwise you would not have a core position at all. It would be a different trade). This trading position is one that you use to exploit the market action. You buy it when the stock dips, and you sell a fraction of it, or all of it, when the stock pops up.
4. The above explanation leads me to today. Here is the chart.
If you want to establish a “core” position, then just buy the thing. Just take a small position — very small — and get involved. Yes, you’re buying a piece of the company at a big premium relative to yesterday’s purchase price…but you’re banking on the fortunes of the company, not the ebb and flow of the stock. Yet the trader mentality must influence even your original purchase of the core position. And since the stock has gapped up and now dealing with $200, and likely to fill some of that gap, you buy very small. Just enough to give you a stake in the company. You then decide when to buy more based on what the stock does in the days/weeks to come.
5. That leads us to the “trading” position. I wouldn’t be buying AAPL for a trade now. The stock gapped up, the S&P is selling off today (not a lot…but enough to matter), and you are going against the grain with no particular indication of where the bottom is. Simply put, AAPL is not a particularly good risk-reward for trading to the long side TODAY. That’s not to say that it won’t move higher; rather, that it’s just risky to buy “right here, right now.”
Anyway, that’s my two cents worth on AAPL. Hope it is of value to some.
–Dan