Seeking Alpha
Long only, contrarian, special situations, value
Profile| Send Message|
( followers)  

"Uncertainty is caused by a lack of knowledge. Hesitation is the product of fear." - Anonymous

Judging from the market sell-off and increased volatility over the last few days, the politicians must be back in town. Oh well, it was nice while they were away for the Thanksgiving break and not on TV in campaign mode instead of meeting to resolve the "fiscal cliff". Looking for silver linings, Apple (NASDAQ:AAPL) sure has had a nice run since its predicted bottom on November 16%. The stock has gone from $506 intra-day on the 16th to over $590 before its recent pullback to around $575 in this latest market downdraft and we should expect volatile trading sessions until the politicians decide to behave like adults and reach a deal. For those that did not pull the trigger or add to their position when Apple approached $500, this could be another nice entry point.

I say this for myriad reasons. First, ever since the iPhone debuted in early 2007, Apple has had a history of solid performance in December (See Chart). The one exception was in 2008 when no one knew if the world was falling apart or not. This makes some sense. The company consistently launches new versions of its iPhone and iPad franchise in time to take advantage of the critical holiday shopping period. In addition, it products predictably beat estimates when it comes to projected demand. This year is no exception with the launch of the iPhone5 the ,mini iPad and the next generation of iMac.


(Click to enlarge)

Second, it appears that Apple has finally ironed out its supply problems with the iPhone5. The company has now also regained its lead in the United States smartphone market from Android.

Another possible driver for stock price appreciation in December would be the announcement of a special dividend by the end of the year. This would allow the company to provide income to their shareholders (including the Steve Job's estate) before higher dividend tax rates take effect in 2013. Given how many other companies are doing this such as Las Vegas Sands (NYSE:LVS) which I also own, this would be a logical move given Apple's huge amount of excess cash. Apple initiated a dividend after the passing of Steve Jobs, and this potential special dividend is getting a lot of conjecture recently on CNBC and Bloomberg as well as other media outlets. Apple has over $120B in cash and short term investments. Granted, some three quarters of it is domiciled overseas, but a dividend of $10B to $15B is eminently doable. This would equate to roughly $11 to $17 per share special dividend.

Finally, Apple is going to get a lot of play in the media as its products continue to be "must buys" during the Christmas season. This is one of the reasons for Apple past solid performances in December. Early indications show it is having a very strong holiday season so far. In addition, iTV talk is picking up which would be a significant driver of the stock price should any announcement around that potential game changer be forthcoming.

Source: Apple Poised For A Strong December