Why I Don't Own Apple Stock

Includes: AAPL
by: Glen Bradford

One of my investors decided to buy 1000 shares of Apple (NASDAQ:AAPL) today. I don't find this a particularly profitable idea given my perception of risk, and wouldn't mind sharing with the world why I feel this way. Whereas it made sense to buy Apple 3 years ago, I can't rationally make that same case for investing at current prices at the present time.

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Last week I referenced my trustworthy contraindicator for the end of trends, the Wall Street Journal, and noted that corporate profits are at all time highs. Better late than never, I suppose... but there's a significant difference between being prescient and talking about what is going to happen, and simply reporting on what has happened in the past.

1. Competition is compressing Apple's margins. Google's (NASDAQ:GOOG) Android platform and strategy is absolutely obliterating the competitive edge of Apple's smartphone and iPad at the same time. All of my electrical engineering friends have been replacing their iPhones with Android powered alternatives. Also note that while I'm directly pointing out reasons Apple is in trouble, Research in Motion (RIMM) is on the same slippery slope. Check out the most accurate Apple blogger's subscription based blog if you want further insight into why this sell signal is very timely.

2. China is but a dream. China has been pulling the entire stock market and global economy by creating the illusion of value-add activity. I can tell you that there is a difference between GDP and productivity in a country led by a small group of communists. Regardless, this is going to drag down S&P500 corporate profit margins as commodity prices drop, and I don't suppose that Apple's stock price is going to hold ground when other stocks are losing ground.

3. Goldman Sachs recently sold half a billion dollars worth of Apple stock into its conviction buy recommendation to its clients. I can't say that I'm a fan of Goldman's business model-- which appears to be more or less taking advantage of existing clients, who fight to get a place at the Goldman table only to find that the grass isn't so green.

4. Warren Buffett has advised that the predictability of future cash flows from Apple is low by his standards, and I agree. I also think that the current market price disagrees and analyst recommendations are coming from those who think that Apple is highly predictable.

5. Frankly, Apple stock around $350 appears like a healthy short idea to me. Amazon is proactively setting booby traps for services that Apple hasn't even launched yet.

6. The HTC EVO 3D is already superior to the iPhone 5. The latest android technology is amazing. 3D on your phone without glasses is already here.

Where do you price Apple if the company fails to show year over year growth? How about if its earnings actually decrease? I don't think we'll see that this year, but it would be irrational of me not to see this as a possibility when I perceive that the company is not leveraging crowdsourcing and innovation as its competitors are. All I am saying is that it is time to exercise caution when margins are falling. Sure, you can compare Apple to companies that are even more erroneously overvalued-- like Netflix (NASDAQ:NFLX) or Amazon, but stock price changes happen on a daily basis, based on daily supply and demand.

The counterargument to all of this is that when you subtract its net cash position, Apple is historically the fastest growing company for its price in the S&P500. I don't really see how it would continue this trend, and the market certainly isn't pricing in astounding growth for Apple.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.