Recession Creeps into Apple, RIM Estimates

Investors in Apple (AAPL) and Research in Motion (RIMM) have watched their investments plummet in value over the past several weeks.

Apple's January 22nd earnings report came in weaker than expected with sluggish iPod sales and future guidance below Wall Street's expectations (see conference call transcript). This guidance prompted minor cuts to future EPS estimates for Apple.

Research in Motion reported strong earnings and forward guidance in December (see conference call transcript). Apple's weakness has resulted in very minor future EPS revisions for Research in Motion.

Both stocks were significantly below their 52 week highs when Apple reported on January 22nd. Both stocks were sold heavily after Apple's report.

Even with these downward revisions, both companies' fundamentals are among the strongest of all publicly traded shares: 25% plus EPS growth, no debt, stellar return on equity. This has not prevented each from being marked down dramatically.

I had initiated a long position in Research in Motion on December 31st. I sold out quickly because of the poor trading "action" of the shares, other glamour names and the general market.

Other previous leaders Google (GOOG), Baidu (BIDU) and Intuitive Surgical (ISRG) have been sold heavily and characterized by incredibly weak "action" with almost no fundamental developments.

I only invest in shares with the very best fundamentals. Furthermore, I only invest in shares with the very best technicals. Technically, the best shares have been weak since the beginning of the new year. This weakness led to my moving the entire Glam 5 Index to cash on January 2nd.

This simple act has allowed the index to beat the NASDAQ by more than 10% in the first month of its existence.

Disclosure: none

Comments

[Jon T:]

For a far better assessment of the Apple results I recommend reading this:

www.roughlydrafted.com.../

2008 Jan 27 06:26 AM

[Linda:]

As an AAPL long, I've lost my money by holding. I was looking for someone who got it right, by selling or shorting. You are the first one I found who got it right. If I have scraps with which to start again, I hope I'll know when you think the downtrend is over. Don't fail to write a column: I'll be watching for it! Kudos to you for going to the sidelines early this year. I wish I'd known.

2008 Jan 27 06:34 AM

[Tom B:]

I'm basically accumulating Apple until they start achieve realistic domestic computer market share-- let's say 20% plus. This temporary glitch is simply a buying opportunity for me, given that it'll be 2-3 years before I start thinking about selling.

2008 Jan 27 01:05 PM