The Apple Party Continues

Includes: AAPL, IYW
by: Roger Nusbaum

The share price is not the only thing about Apple (NASDAQ:AAPL) that has gone parabolic, the media/blogosphere attention has also gone parabolic. The company announced a long awaited dividend for part of its cash hoard, along with a share buyback.

George Moriarty collected a long list of Seeking Alpha articles here. (George hired me on in 2005, we've been friends ever since and now he is working for Seeking Alpha.)

I had a similar post recently and the mania around Apple has grown meaningfully since then (well, I think it has). The last time I mentioned Apple it was around 18% of the iShares DJ US Technology ETF (NYSEARCA:IYW) and now it is 20.9% of IYW. IYW is an ETF we use for some of our clients.

Trying to predict when or how a mania ends is pretty close to impossible without getting lucky (everyone gets lucky every once in a while), but this will end one way or another, as they all do, and it would be reasonable to expect some sort of shareholder pain. Maybe this won't happen until $900 but right here the stock is up 48% YTD, which is amazing for what was already one of the largest companies by market cap (now it is the largest).

In my opinion, anyone who has made a lot on this stock would not go wrong selling some portion of it right here and continuing to (hopefully) ride up higher. If instead, it starts heading lower then you sold at a pretty good time. I view this as a win no matter what scenario.

I have no argument to make against the stock, it has changed the lives of a staggering number of people for the better and it is tough to envision what will come along to derail the company, but figuring that out is not really something a portfolio manager needs to worry about (including do it yourselfers who are their own managers). This would be more for the analysts to figure out.

The reason I say portfolio managers don't need to figure this out is because they really just need to recognize that there is a mania that has sent the stock up at an unsustainable rate, know that this has happened many times before with other stocks (including AAPL) and deploy some sort of risk management strategy. I prefer the one mentioned above, other people may prefer stop orders, others may want to use options but some sort of protection would be warranted.