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You are here: MacNN Forums > News > Mac News > AAPL closes below $400, but still ahead of moving average

AAPL closes below $400, but still ahead of moving average
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Jun 26, 2013, 09:25 PM
 
Apple's stock has continued wavering in the marketplace, closing below $400 for the first time since mid-April on Wednesday and down some 43 percent from its all-time high of $705 nearly a year ago. While still trading higher than it was at the time of former CEO Steve Jobs' passing, many investors are puzzled at why a company with very solid fundamentals, a newly-announced generous dividend and buyback program, and a low price-to-earnings ratio would be doing relatively poorly. According to a new analysis of the stock, the problem is emotion.

TheStreet's Robert Weinstein believes that casual investors -- those who got in because the company was doing so well financially and don't really understand its unique culture -- are bailing on AAPL in the short term because the company has put off announcements about any of its most profitable products until late summer or the fall. While the next iPhone and iPad models are of course expected to do very well and are highly profitable, the company's decision to stick with a more-or-less yearly release of its two largest moneymakers keeps investors nervous about improvements made by the competition.

In part the problem is one of Apple's own making. By being secretive and investing a lot of emotion into its products, the company fosters a culture of irrational expectations and emotional speculation rather than a a calm analysis of the company's fundamentals -- which, Weinstein says, are strong. While AAPL is trading near its 52-week low, he points out that Apple's month chart -- which he relies on as a better gauge that is less likely to be as influenced by emotion -- shows rising 60-, 90- and 200-day moving averages, with the stock still selling above the moving average.

Speculators may indeed be exerting influence to try and drive the stock down deliberately, hoping for a spectacular rise when the known future announcements -- new iOS 7, new Mac OS X, new iPhone and iPad hardware -- come to pass in the fall, leading up to Apple's busiest time of the year, the holiday season. Nearly four years after the iPad debuted, it is still without peer in the tablet market and is Apple's fastest-growing product line. While Apple faces tough competition from a variety of Android devices both in and outside the US, its market share in North America is rising -- which may foretell a turning of the tide in other regions, particularly if a rumored "low cost" iPhone model becomes available, never mind any completely new products like the alleged Apple HDTV.

"You're making a substantial mistake if you underestimate the role emotion plays in pricing securities," Weinstein writes. "A stock can gap higher a the open, fall below the previous day's low and then spring back to close at a new high. Obviously the underlying company didn't change in value in a single day ... the force moving the share price is emotion." He adds that while it is easy to see the impact of emotion during a single day, "investors should know that the same applies over the course of days and weeks."

Weinstein hints that Apple's current stock price may not be as "out of whack" as some might think, inferring that the rise to the $700 level was an emotional reaction that drove the stock "too far too fast." Strip away the hype and speculation, he says, "what you're left with is a rising stock with solid fundamentals." That said, he adds that "it doesn't invalidate the Wall Street adage that 'the market can remain irrational longer than you can stay solvent'."

For those who are willing to hold on until the inevitable holiday season improvements but cannot risk further stock price degradation, Weinstein offers an alternative: hedge the stock with call options rather than selling. He offers the following example: "An Apple investor can sell September $415 calls against the shares owned for about $13. By hedging with call options instead of selling your shares today, you give yourself another $13 of cushion during the summer months to wait and see what the next earnings release brings, and give the market sentiment a chance to change. You also collect on the next August dividend payment."

"Based on the last $3.05 distribution [per share], you then have $16 that Apple needs to fall before breaking even on this strategy," Weinstein writes. "On the other hand, if we are near the bottom and shares are trading above $415 on expiration day, you can simply buy back the options at the going price. With your gains from the stock appreciation, dividend, and initial option premium, you're fully covered. In fact, if Apple is above $415 on option expiration day, you will gain about $30 more than if you had liquidated today."


     
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Jun 26, 2013, 10:24 PM
 
After a lot of thought, I think there are at least two good reasons why AAPL is down.

1) The mutual fund managers want volatility - they need to manipulate stocks in order to profit. They play their little mutual-fund manager games amongst each other, seeing who can trigger a herd reaction and be on the winning side of that landslide. Now AAPL is down, later it will be up. It's too big a part of the NASDAQ - heck, the entire market - to be ignored like this forever.

2) The professional money manager crowd hates the fact that tens of millions of individuals have purchased AAPL stock on their own, without paying money management fees to the money manager crowd. If these tens of millions of individual, thinking investors can make money without the money manager crowd then who needs the money managers?? The money manager crowd wants the individual, free-range investor to fail. There's incentive across the entire financial management industry to lower the price of AAPL as far and for as long as possible to shake out the individual investors.

The stock market and financial industry is severely rigged against individual "retail" investors. Profits are made by using insider information and by seeding false information to the public, thereby temporarily creating runs or sells on certain stocks.

While I don't think there is a formal conspiracy to manipulate the stock, there are systemic reasons why AAPL is down. None of those reasons have anything to do with Apple or its performance in the actual market (not stock market) in which it competes. All of those systemic reasons have to do with the parasites that are the financial industry.
MBP 17" Core i7 matte screen; iPad 16Gb 3G
     
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Jun 26, 2013, 11:42 PM
 
a 4k display will be on my dear santa wish list !
     
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Jun 27, 2013, 01:04 AM
 
Duh... (though I'm glad to see an article actually admitting it). The stock market is neither really investing anymore, nor is it rational. It's a play-thing for the wealthy, much like a combination of a strategy game and gambling. Yes, it is run on speculation and emotion. And, as Jeff75 pointed out above, a good amount of manipulation takes place as well by those who can wield the power.

An individual investor basically has to just pick a few stocks they can become knowledgeable in, and then out-guess and/or ride-out the stupidity. Eventually, the actual financials usually form some kind of correction, at least for a period of time.

A friend of mine, who does have the spare cash to play the game makes a good amount of money doing so. It's not untypical for him to make $15k in a morning and he can usually do that a couple times per week across a few companies that he follows. All you need is a bunch of cash that isn't tied up and some smarts about you. He freely admits it isn't investing... he says that if it were investing, the rules wouldn't be structured the way they are. 'Investment' is just the term used to make it appear like it's legit. But, he's also very aware that one of these days, it's all going to come crashing down. I just feel sorry for all the folks with their retirements tied up in the market. They are going to be out on the street. IMO, it's going to make the Great Depression look easy.
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Jun 27, 2013, 11:22 AM
 
Haha! I like that Wall Street adage. I'm going all in with my retirement money.
     
   
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