Unlike the old saying, that an "Apple a day, keeps the doctor away," I am certain that many stockholders of Apple (AAPL) found themselves pulling their hair yesterday as they struggled with deciding whether they should buy, sell or hold their position in this stock.
It comes with no surprise to this investor that AAPL pulled back yesterday. Let me be clear. I am probably the most bullish, "Pro-iLife" investor that you will find. However, let us take a look at a few points here:
Point #1: In Mid-September AAPL peaked at roughly $700/share. It is not so much the price that we should be concerned with. At this time I would like for you to think back to the overall stockholder sentiment during the mid-September time period. We must have read 3 or more articles a day dictating that AAPL was going to rise to $1000/share. In the weeks to follow, volume increased significantly in this stock. It's plausible that AAPL became oversold with short term investors looking to make a "quick buck". Let's hold that thought for a moment, while we move on to Point #2.
Point #2: Reuters reported yesterday that there were unconfirmed reports that "at least one major stock-clearing house [is] raising margin requirements on Apple stock trades." With the holiday season coming up and talks of the Fiscal Cliff looming, the average investor, literally, cannot afford a margin call.
When we take both of these points into consideration, we realize that regardless of the true value of AAPL, this stock was destined to fall before it was to rise. Yesterday's pullback has very little to do with AAPL's value, and more to do with the average investor not willing to be long in this stock, at this point in time.
Now I am sure that some reading this article would disagree and think that since AAPL broke the 200 day moving average yesterday, this signals a downturn in this stock. I would challenge this line of reasoning by reminding said reader that towards the end of the trading session, AAPL rallied back towards this moving average. If however, AAPL were to continue to fall below the 200 day moving average, I do think this would be a reason for concern and could be an early indication that investors are beginning to sell in increasing numbers. For the time being, this one day dip below the 200 day moving average is not enough to convince this investor that AAPL's stock is heading south.
There are several things that are paramount with respect to AAPL's standing in this market and further prove that AAPL is fiscally healthy. We need to remember that:
- This is the same company that recently sold over 3 million iPad Minis . This is proof that even though Steve Jobs has passed on, Apple is still able to bring heavily demanded products to market under the leadership of CEO Timothy Cook.
- We are not seeing the classic signs of a company that is undergoing a downturn. Insider trading is at a minimum.
- For the past 3 years, Apple has seen a 50% year over year increase in profit. With over $60B worth of profit on the books this past September and a market cap in excess of $500B, Apple is hardly looking like the broken company that some would like you to believe that it has become.
Overall, it is clear that AAPL was traded yesterday primarily off of human emotion with little regard for the current/future value, product line or the financial health of the company. I recommend that all of my fellow investors use this pullback as an opportunity to buy, with the understanding that this is just a temporary setback for this stock. Chances are that we may never see AAPL stock trading at these low levels again.
Disclosure: I am long AAPL.