Seeking Alpha

Epsilon's  Instablog

Epsilon
Send Message
Epsilon is a proprietary investing firm. Also the developer of The Stock Advisor smartphone apps, a series of apps that deliver recommendations and investment education to its users, Epsilon has successfully outreached its services to clients around the world and continues to look for better... More
My company:
Epsilon
My blog:
EpsilonFinancial.com Blog
My book:
The Stock Advisor App Series (iPhone/Android apps, not a book)
View Epsilon's Instablogs on:
  • Apple: Buy On Weakness Or Stay Away?

    When Apple, Inc. (NASDAQ:AAPL) hit $700 after the release of the iPhone 5 in September many wise investors felt that the stock was overbought and ready for a correction. But an over 20% fall through significant support at the $600 price level has come as a bit of a shock to even the savviest of investors. So when, if ever, will Apple, Inc. rebound?

    Let's first take in to account that analysts are still confident in the company's worth and maintain a $767 average price target, with a high target, from Topeka Capital analyst Brian White, of $1,111, a target that was reiterated Thursday, November 8, 2012. (Based on the above-mentioned $767 average price target, that's a 40% upside from the stock's current price.)

    Analysts remain confident in Apple, Inc. partly because the recent stock price correction is very reminiscent of three other recent corrections the stock has successfully left in the dust, a 16% correction in October last year, a 15% correction in November last year, and a 19% correction in May this year.

    Though the current correction is a bit more significant and has brought the stock further below its 200-day simple moving average (currently 7% below its 200-day SMA) than previous pull backs, this could be partly due to additional, politically-induced market fears including the "fiscal cliff" scare and the possibility of a higher 2013 capital gains tax rate.

    But even with this taken into account, doesn't it seem that Apple, Inc. is grossly underpriced at present? I think so, and here's my take on it.

    Apple, Inc. tumbled through support at the $600 price level recently and didn't look back. But now it's up against a more significant support level at $530. I say this support level is more significant because it served as resistance for the stock in March and, after breaking above this level quite quickly, investors then used this price as a place to buy during the pullback in May, making it a new support level for the stock.

    Now we're right back where we were in May, and what's worth noting is that at the lowest point of many of Apple, Inc.'s previous pullbacks, volume increased significantly. The recent pullback to $530 in May was no exception. Volume increased from about 15 million to 25 million, at the stock's lowest point, then back to 15 million shortly after. We're now seeing a similar volume pattern in the current pullback, with volume increasing from about 20 million to 35 million, indicating a possible repeat of the May bounce.

    Apple, Inc. is also approaching a retail season that has, historically, been very successful for the company, with a very strong product line up including the iPhone 5, the already popular iPad Mini, the iPad 4, the redesigned iMac, and the new retina display MacBook Pros. Sure there are skeptics who fault Apple, Inc. for lacking innovation when comparing current products to those previous, but the current product line up for Apple, Inc. is still very strong and is unlikely to disappoint.

    In fact, regarding the demand for tablets, a recent Pricegrabber survey shows that the "Apple iPad and iPad mini" are the "top-ranked overall tablets" and boasts the heading "iPad mini wins consumer vote in lower priced tablet category". To detail the survey, of 1,465 U.S. online shoppers, the majority preferred a tablet over a PC as a holiday gift; 63% preferred a regular-sized iPad while 24% preferred an iPad mini, which was also preferred over less expensive competitors like Google, Inc.'s (NASDAQ:GOOG) Nexus 7. So, as you can see, demand is certainly there for Apple, Inc.

    It should also be noted that recent missteps, which have contributed to the company's stock price decline, are being fervently addressed. First, the iPhone 5 supply, which has been a significant concern for investors "no longer appears like it will be an issue", as stated by Walter Piecyk of BTIG Research. Also, the map troubles of iOS 6, which partly caused the departure of iOS Chief, Scott Forstall, are being addressed as well with the new operating system, iOS 6.1, which is currently in development and should be released soon.

    The company is also investing in an online radio service, to compete with Pandora Media, Inc. (NYSE:P), and, with internet content quickly replacing that of cable and satellite providers, Apple, Inc. is also positioned to further compete with companies like Comcast Corporation (NASDAQ:CMCSA) and DirecTV, Inc. (NASDAQ:DTV) with their, already successful, Apple TV.

    And let's not forget about the company's exceptionally strong fundamentals, which include a 9.32 forward P/E, 42.84% return on equity, and 35.30% operating margin, to name a few. Compared to competitors Amazon.com, Inc. (NASDAQ:AMZN), with a 127.86 forward P/E, 0.52% return on equity, and 0.93% operating margin, and Google, Inc., with a 14.29 forward P/E, 17.18% return on equity, and 28.06% operating margin, Apple, Inc. seems very capable of overcoming competition and is well poised for a continually bright future.

    In summary, I can easily see Apple, Inc. reaching back up to $650 or possibly even $700 within just a couple months. That, if it happens, would be a two month, 28% return. Not bad.

    Now, I don't mean to be unreasonably hopeful, nor do I assume to predict the future. But with continued analyst confidence, the stock's historical price history, the company's current product line up going in to a historically strong retail season, and the anticipation of new product developments, I am exceedingly optimistic about what Apple, Inc.'s stock will do in coming months. And with the stock trading near the above-mentioned $530 support level, now may be a very good time to purchase Apple, Inc., a company whose recent missteps will likely soon be overshadowed by coming successes, just like last time and the time before that.

    Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Nov 12 12:49 PM | Link | Comment!
  • Monthly Dividend Payers, Inverse ETFs, And Trade Log Spreadsheets Available For Download

    The research lists from Epsilon Financial, "Monthly Dividend Payers", "Inverse ETF Spreadsheet", and "Trade Log SPreadsheet" are now available for download/purchase.

    The "Monthly Dividend Payers" spreadsheet is a list of 69 equities that distribute dividends on a monthly basis, with dividends ranging from 1% to 22%. This list was compiled for an article written by Michael Lee on January 4, 2012. Please note, dividend yields stated in this spreadsheet may have varied since its completion.

    The "Inverse ETF Spreadsheet" is a spreadsheet with over 150 inverse ETFs (exchange traded funds), compiled for an article written by Michael Lee on June 5, 2012. This list includes inverse Alternative, Bond, Commodity, Currency, Equity, Multi-Asset, and Real Estate ETFs.

    The "Trade Log Spreadsheet" is a spreadsheet used for keeping a detailed trading log. The first tab in the spreadsheet is a full trading log with all formulas in place as well as sample data. The second tab is a monthly and quarterly profit and loss sheet with all formulas in place as well as sample data. View a video tutorial on how to use this spreadsheet here.

    As more research and investment data is collected the Research and Downloads page will be updated.

    Sep 07 6:50 PM | Link | Comment!
  • 4 Short Term Picks With Technical Buy Signals

    When it comes to short term trading, a strategy in which I hold positions for no more than a couple weeks, I rely heavily on technical analysis.

    I often look to find value in equities that are trading near support, show signs of future, positive price momentum, and offer stable or strong volume, and up-turning stochastic and MACD indicators. Stocks with strong company fundamentals, though not a necessity for my short term trades, are certainly favored.

    Below are four equities that are trading near relative support and show potential, positive price momentum:

    1. MGM Resorts International (NYSE:MGM) is trading just above strong support at $9.50, a level the stock has not been below for more than a week since August, 2009. Fundamentally the company is strong and produces very good returns with its 50.31% return on equity (ROE). The company also appears somewhat undervalued as it is currently trading for less than book with a 0.82 price to book (P/B) ratio.

    Stochastic and MACD on both daily and weekly charts are beginning to turn upward, adding evidence of a potential bounce off of support at $9.50.

    Below is a three month look at recent price movement on daily charts. As mentioned, price, stochastic, and MACD appear to be consolidating near the $9.50 support level and look to be ready to begin a short term trend reversal to the upside.

    (click to enlarge)

    2. Hertz Global Holdings, Inc. (NYSE:HTZ) fell hard in May but consolidated at the $12.00 price level and has since used this level as support. The stock is now trading just above this level, potentially offering a good entry point. Hertz Global Holdings, Inc. doesn't appear significantly undervalued like MGM Resorts International above but does show a low price to sales (P/S) ratio of 0.61 and produces decent returns, 12.66% return on equity (ROE) and 4.19% return on assets (ROA).

    Stochastic and MACD on both daily and weekly charts also look to be leveling off and ready to turn upward. The stock also appears to be, once again, consolidating at the $12.00 support level mentioned above.

    Below is a three month look at recent price movement on daily charts. As mentioned, price, stochastic, and MACD appear to be consolidating near support and show signs of a potential bounce off of this $12.00 level.

    (click to enlarge)

    3. Pier 1 Imports, Inc. (NYSE:PIR) is trading in a similar price pattern as Hertz Global Holdings, Inc. The stock broke above resistance around the $15.75 price level in late January this year and has since used this price as support. The stock is, as it has done many times since January, trading just above support at $15.75, potentially offering a good entry point.

    Though not necessarily undervalued, fundamentally, the company is strong and, with a 38.67% return on equity (ROE) and a 13.29% return on assets (ROA), produces good returns.

    Like the stock's price in recent sessions, stochastic and MACD on daily charts are beginning to consolidate and look to be turning upward.

    Below is a three month, daily chart look at this consolidation near the $15.75 support level:

    (click to enlarge)

    4. iShares Silver Trust (NYSEARCA:SLV), like silver, the commodity it tracks, has consolidated around support and is now trading just above this level. iShares Silver Trust has used the $26.00 price level as strong support for over a year and hasn't been below this price for more than a week since it broke above this level in November, 2009. As this is an exchange traded fund (NYSEMKT:ETF), SLV has no significant fundamentals to offer in our analysis.

    As silver has been a bit unpredictable this year, stochastic and MACD for iShares Silver Trust also appear inconsistent and do not offer a clear picture of future price movement. Support, however, as mentioned above, looks very strong.

    Below is a look at the ETF's price movement around the strong, $26.00 support level, a level I would be very surprised to see SLV fall below anytime soon.

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HTZ, MGM, PIR, SLV over the next 72 hours.

    Jul 16 6:46 PM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Most Commented
  1. VIV : TSP Merger (3 Comments)
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.