Is Apple in a bubble? Or is its recent rise justified by its future earnings? Today an analyst from Topeka Capital Markets called Brian White came out with Wall Street’s highest price target ever — $1,001 — 62% above where it closed last night!
I have pounded the table for table for Apple incessantly in recent months. Apple has been good for my portfolio and those of my readers who have listened.
There is no way to predict where Apple will go now. Increasingly my friends are lapping up Apple products, dumping Microsoft’s Windows, etc. When I write how frustrated I am with Windows 7, I am avalanched with emails about how readers switched to Apple computers and iPads and their lives have been significantly enriched. It’s cult-like.
For many institutions, Apple remains their largest holding. I haven’t heard of anyone selling — “to take some off the table” — or for whatever other reason.
Still, the market is irrational and totally unpredictable.
Business Insider clipped this piece from a well-respected brokerage firm called Stifel Nicolaus. It compares Apple to a couple of other bubbles that ended in disaster. You can read their “logic.”
So, what do we, as Apple shareholders do? We have three choices:
1. Buy more Apple.
2. Sell some or all of what we already own. Take some profit off the table.
3. Do nothing. But be extra vigilant. Keep our tops tight. Sell, should it begin to fall.
My choice is 3. If Apple drops 8% to 12% (depending on how I feel that day), I’m out.I like Apple, but I’m not wedded to their stock.
There’s absolutely no reason why you have to sit there like an immobile deer frozen in the headlights and hold Apple forever, especially if it starts to fall.
You should also be aware that there’s basically no one out there that will ever recommend selling Apple. Certainly not on BubbleVision (CNBC) or in the Wall Street Journal, etc. The profitaility of these companies booms when stockmarket are booming. It is not in their interest to be glooom and doom. Think Larry Kudlow. That fellow is always positive. Jim Cramer, to his credit, does recommend selling. But his mantra is “there’s always a bull market out there and my job is to find it for you.”
Back to my choice 3. Sell.
I sold in 2000 when the shit hit the fan (technical expression) for tech stocks on NASDAQ, including Cisco, Microsoft, Brocade, etc.
Of course, I was too dumb to sell them short. This is a salutary chart:
Lessons from this chart:
1. When it crashed, it crashed quickly.
2. It didn’t crash straight down. It kept bouncing back — just enough to fool dumb investors into thinking it would come fully back. Of course, it never did.
3. It still hasn’t come back.
There are a million ways to invest your money.A short list this morning:
1. Contemporary art. 60 Minutes did a piece on contemporary art last Sunday. Returns have been nothing short of remarkable. Watch the piece here.
2. Some commodities — especially silver, tungsten and maybe gold.
3. Guitars. A rock star friend of mine has been collecting them for years. He sold one recently $25,000. He’d bought it for $5,000.
4. Fine wine. Friends hold the stuff in their cellars for ten years or so, let the stuff age and then sell it for a small fortune. The good thing about the wine market is that there are no guarantees. If you sell a bottle for $12,000 and your buyer discovers it’s rancid, tough. He can pound sand.
5. Collectibles. One of the most popular shows on public TV is a show about stuff.
6. Land that’s unique and non-reproducible. Houses are easy to build. Land, with a view and a great location, isn’t.
The moral of this story? Get excited. Learn something. Turn off bubblevision.
Miracles happen. My friend is getting 100% of his MF Global trading account money back. and his friend is also. Though they don’t have the checks yet. No one knows where the money is coming from. And no one wants to ask.
Found on a bathroom door in a restaurant, somewhere in California:
Carry an iPhone. Never miss the chance to photograph trivia, even in the local bathroom.
Harry Newton whose Australian friend Patrick, emails this morning:
The Australian government has announced that due to the shortage of Australian electricians and plumbers, that it will be allowing selected US qualified electricians and plumbers to migrate to Australia. Newspapers here in Australia that I have seen have carried the story, but never on the front page. There is to be an Australian government funded expo in Houston in May to “showcase” to qualified US workers the opportunities that exist for them to work and live in Australia.
A curiosity to this “expo” is that preference will be given to trades people who are US military veterans. The reason behind this unusual selection criteria is that supposedly US war veterans would be used to working in “remote” areas. Of course any US worker that moves here will probably have a heart attack when they see what things cost here.
Coincidentally, 2,500 US marines are currently moving into Darwin which will become a permanent US military base. The purpose of this base is, according to Australian news reports, to be able to offer rapid response reaction to any natural disasters that might occur either in Australia itself or in South East Asia!! Just as well our government explained that purpose to us. Otherwise, we’d be thinking that the US troops are there to protect the enormous US and international investors’ interests in northern Australia’s oil, gas, rare metals and minerals.
I understand that the Australian government is considering declaring war on the United States. The government’s logic is that it will lose the war, be occupied and benefit by huge reparations to rebuild the Australian economy. This scenario was once played out in the famous 1959 Peter Sellers movie — The Mouse that Roared. A small European duchy declared war on the U.S. and actually invaded downtown Manhattan. the sad part (at least for them) was that New York was on a air-raid practice alert and no one was on the streets to battle the arriving army. Hence, the European duchy won the war… Rent the movie from NetFliix for the rest of the wonderful movie.
Australia’s army is more advanced than the one Peter Sellers fielded to attack the U.S. But it will still lose. Thankfully.
Since I was born in Australia, maybe I’ll get a job as advisor to the State Department on how to deal with the Australians and their strange culture, and even stranger sense of humor.
She’ll be right, mate.
If you can’t read the Apple chart above, go the Business Insider site. Click here.
I'm not going to address the Apple stock price; I am in no way qualified. But I have to comment on your cult comment about Apple.
Last night I ported all my Outlook files into the Mac version of Outlook on my new MacBook Air, without a single hitch. I was able to go right back to WORK. I have also gotten all sorts of things up and running on the Mac – in seconds, flawlessly and logically, again without a hitch. Apple instantly and automatically has recognized the other computers on my network. Even my Logitech USB headset works plugged into a 7-port USB hub, not to mention the Ethernet-to-USB adapter. Everyday, tiny tasks that take 5 clicks with Windows happen in 1 or 2 clicks on the Mac.
In contrast, the only thing I'm wrestling with now is getting my still-working-on-it-Windows-desktop-machine (because it has two screens attached to it and I tend to do a lot of work on that machine) to recognize the Mac. Pffffft.
The hours, days, weeks, and probably literally months that I have wasted fussing with the convoluted, nasty aspects of Windows instead of WORKING have been flashing before my eyes the last few days.
I have no idea why people think that the Mac is not a “serious” work machine. Because it just “works,” I am, also. I can already tell I'm going to be much more productive on the Mac than I ever was with Windows. Harry, you won't know why people are besotted until you make the switch. I have no idea if Apple will be this good going forward – after all, Steve is gone – but right now, I wish I had made the switch a lot sooner.
kz
Trees do not grow to the sky. Apple SCREAMS “bubble”. To heck with the PE and with any analysis of competing products. The “competition” is not RIMM or Dell or Android. The competition is whatever else the individuals might do with their dollars, euros, kroner, etc. Gas is now well over $4 a gallon. Will $5 gas be the point where iPads are not bought because money must go to fuel?
The Kindle Fire hasn't measurably impacted the iPad sales because…. it's a little smaller in screen size. Is Amazon going to sit back and enjoy that position? Sure. Count on that.
Note that the “analyst” who said the stock will go above $1000 says he thing Apple will continue to innovate and lead “forever”. Yeah, good luck with that too.
WHEN the price starts to slip, your reaction time had best be very fast. Else, watch for a big woops. IT ain't gunna be no “dip.”
If it were me owning AAPL Harry, I'd be taking some money off the table and diversifying to good yielding undervalued stocks. But then I'm a contrairian value investor. My red flags start going off when a stock becomes too popular too fast. Apple's PE isn't really THAT high right now, but it is up 50% over the last two quarters. Have fundamentals improved drastically to justify that level of multiple expansion? Or is this a bubble forming?
One other thing that worries me about Apple right now is the high level of insider selling. Insiders have been dumping the stock in droves. All the while, institutions and individuals can't get enough. If I had to pick which is the smart money, I'd probably choose the insiders. Although insiders aren't always right, this is another worrisome sign.
There is no argument that Apple is an incredible company with great products and a loyal customer following. But everything has a price limit.
Harry, you have developed some good trading rules -SO FOLLOW THEM. You have selected 8% as the maximum pull back you want to risk (NOT 12%). You bought in with several orders at different prices, you can exit a set % of the total at different pull backs…. example 25% @ -3%, 25% @-5%, and 50%-8%. Don't turn this trades into a “Ship High In Transit” (per you dictionary) trade. You can always buy back in when it is On Sale at a lower price. If you had a bunch of shares you were trying to sell wouldn't you predict the price to go over $1000 ?????
Harry,
It's your money and you have to be the judge, but the chart of Apple's share price looks awfully like a blow off top to me. From less than $400 to over $600 in three months is some rise! Have its prospects really improved that much in so short a period?
Recently, I was invested in a small gold mining company that had a chart that looked very much the same. I tripled my money. When it fell back a bit I sold almost all my shares within a few days. It's now down about 40% from the top in just two weeks. I know Apple is not a spec miner and I know it makes wonderful products (which I use myself) but it's chart is the picture of a stock where everyone has desperately climbed aboard at any price. When the stock breaks a bit they will be just as desperate to sell. Given the size of the company, a half decent pull-back (which inevitably has to occur sometime) will have a big effect on the US market generally. As with most other stocks or markets that top out, one would expect a decent rebound after the initial serious break, and once that rebound is over there would be a further longer fall. But, as I said, it's your money and you have to decide. I could be wrong.