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  • Apple's Starting To Look Attractive Again [View article]
    You could.

    Really you can name your own price at which you would like to buy Apple stock.

    With the $400/$390 spread, you only have $500 at risk initially, and would make a very nice profit of something like $25 per share on the sale of the $390 put if the stock drops to around $390 at next earnings.

    [Note that the fiscal cliff issues will be upon us again soon, and god knows what that will do to stock prices in the short term, and with new highs on the indexes, a correction is not out of the question. Neither of these will necessarily affect AAPL stock, which is already in the doldrums, but they MIGHT. If the stock market has a really bad day or two, it is certainly not unimaginable that AAPL might drop a few more percent on the day.]

    You would then have to be prepared to be assigned 100 shares at $400 per share in 2015. That result would definitely beat buying 100 shares now for $440 in the event of the stock deteriorating further in the short term.

    Of course, if you believe that AAPL can only go up from here, then this is not for you. But if you want to try to get into AAPL at a once in a lifetime bargain price, it might be worth a shot.
    Feb 5 09:26 AM | Likes Like |Link to Comment
  • Apple's Starting To Look Attractive Again [View article]
    Broadly I agree with the article. If you can afford it, the way to go might be to sell puts now if you have at least $35,000 in an account that you would like to use for the trade.

    You can sell the January 2015 $350 put for at least $30 per share, giving you a net entry of $320 if assigned, or a profit of a little under 10% over two years if not assigned, but for the long term, if assigned 100 shares at net $320 you would have a great buy as a dividend growth play.

    However I would play this a bit differently, selling the 2015 $350 put and buying the $340 put to complete the bull put spread. If you are not assigned the profit will be about 30% over 2 years.

    If the stock then dips even further in the next few months, perhaps below $400, then you can sell the $340 put again for a nice profit and wait to see if you are assigned the stock at $350 in 2015.

    So that would be the plan. EITHER you make 15% per year on a small option spread that would only need $1000 in a cash secured IRA account OR you acquire 100 shares of stock eventually at a basis of $320 per share or less, which would surely be a great deal for the long term. You can enter this lottery play for only $1,000 as long as you have at least $35,000 in liquid assets somewhere in your cash account.
    Feb 5 09:07 AM | 1 Like Like |Link to Comment
  • Can The Apple Tree Continue To Grow? [View article]
    "We will not focus on AAPL's margins and debt etc, as these are all extremely healthy."

    I can't agree with this at all, because the current insecurity in the price of the stock seems to be all to do with pressure on profit margins.

    It seems to be that narrowing margins ought to be there in the threats section. I can see that "cannibalism" is there and it does lead to falling margins where, for example, someone buys a cheaper device like the iPad mini when they might otherwise have bought a full size iPad.

    I think global recession or lack of consumer spending, or consumers being out of cash or at their credit limits also add up to reduced margins. Remember that there are nowhere near so many home equity loans as there used to be a few years ago.

    Every time someone gets the 16GB iPhone instead of the 64GB iPhone, that is a huge hit to profit margins, given the geometrical price addition for more memory. (Also note that with rival products that have memory slots the additional memory is cheaper.) And every time someone buys the iPhone 4 instead of the iPhone 5, that is another hit to profit margins.

    The effect on margins is always at the margins. If the most affluent buyers just get the iPhone with the largest memory as a matter of course, then it makes a hell of a difference to Apple depending on whether 20% or 10% of customers (or some other number) buy that model.

    Just a few percent of Apple customers making a more economical purchase may have a disproportionate affect on the bottom line.
    Feb 4 01:05 PM | 1 Like Like |Link to Comment
  • How Much Should You Pay For Apple? [View article]
    Interesting points, although clearly most high school students and undergraduates will depend on someone else (parents) buying a phone for them and one assumes that most or all of the kids at your son's school will be from affluent families. Also California is a very high wage state and Apple is the "home team" in the sense that the company is located in that state and must be a source of considerable local pride.

    However the nugget of fact to the effect that these affluent young Americans are likely to be Apple customers for a long time to come is not without value, as this demographic will be the leaders and decision makers of the future when it comes to purchasing decisions in the enterprise.
    Feb 2 02:56 PM | 1 Like Like |Link to Comment
  • Why Apple's Margins Will Continue To Decline [View article]
    "If this is how the Stock Market values companies, incredibly high PEs for virtually no earnings and no positive cash-flow AMZN, then AAPL stock will soar if its margins go down."

    Yes,but the next question is how much of your net worth you are prepared to stake to make money out of this theory of yours.

    You can't really compare the two business models.

    Amazon is like a department store that provides a free bus ride from the suburbs to downtown, so that customers will buy their merchandise and not that of rival retailers. It hopes that in the long run the competitors will go out of business, leaving the field clear.

    Apple discovered an absolutely killer combination--a first class brand new product, the iPhone--combining a touch screen tablet computer with a cell phone--with an amazingly effective way of having retailers in the form of cell phone networks providing installment plans to mass market consumers in such a way that consumers are hardly aware of the true price of the device.

    But the question about Apple how long they can continue to make abnormally large profits. It seems unlikely that their next phone will be a quantum leap over what rival manufacturers are offering for less money or that the size of the market for $700 devices in the developing world can continue to provide the same rate of growth that Apple has experienced since 2007.

    My biggest question is whether Apple can simply continue to make the same profits as it is making now. If this is reasonably certain, then the p/e of the stock is quite cheap and a LOT of money can be made if the cards are played right.
    Feb 2 11:50 AM | Likes Like |Link to Comment
  • Why Apple's Margins Will Continue To Decline [View article]
    The question is really where will the chart lines of increasing numbers of devices sold intersect with falling margins.

    For example they sell more tablet computers, but since the mini iPads sell for less than the big guys and at less profit, what is the final outcome?

    They sell lots of music, but if the same music can be bought cheaper on Amazon and downloaded onto the Amazon app/player on an iPhone how does this affect the bottom line, and how much money does Apple get from the Amazon app to compensate for loss of music sales?

    If the phone companies can get similar, equal, or better smart phones from Nokia, Blackberry, Samsung, or LG for less money, how willing will they be to go the extra mile to sell iPhone contracts? If they show every potential iPhone customer another type of phone what percentage success will they have?

    No one really knows the answers to these questions, so there is room for a lot of wiggle room.

    Yes, if you plan to retire in 25 years, it would do no harm to buy a few Apple shares now for your retirement account, but if your financial well being could depend on accurately predicting where Apple stock might be in a year or two years from now, then that is a much tougher proposition.

    I think in another couple of quarters, we will start to get a better idea.
    Feb 2 09:07 AM | 2 Likes Like |Link to Comment
  • How Much Should You Pay For Apple? [View article]
    "I love to use, my Mac, iPhone, iPad and I am very happy to pay a premium to have the privilege to be an Apple (AAPL) customer)."

    It might be better to cover other stocks that you don't have a personal interest in, because if you think that it is a privilege to pay over the odds to be an Apple customer, you might overestimate the degree to which others share your sense of privilege.
    Feb 2 08:18 AM | Likes Like |Link to Comment
  • How Much Should You Pay For Apple? [View article]
    Not really, as you can, for example, sell a 2015 $350/$340 spread for $3000 and only need $7000 to put on the trade cash secured in an IRA. $7000 would buy you about 15 shares.

    This trade would make you almost 50% in 2 years if the stock just holds $350. The downside is that you would lose $7,000 if it doesn't. Now if you owned 100 shares and the price went down to $350, you would be $10,000 in the hole.

    These numbers are just for illustration and really the amount that you want to invest in Apple can be as small as you like. For example you could buy the October $400/$410 bull call spread for $700 and make $300 profit if the stock just holds $410 in October.

    Now compare the risk/reward to owning 20 shares. If the stock goes down to $400 in October you would be $1000 in the hole, or more if it goes lower.

    The chief difference with options is that you must be right about the timing. Suppose, using the above example, the stock dips to $350 in October and then goes up to $600 in November, then the options player is right out of luck, but the stock holder is in clover.
    Feb 2 07:11 AM | 1 Like Like |Link to Comment
  • How Much Should You Pay For Apple? [View article]
    Excellent points. I too like a full sized keyboard for my full-sized hands so that I can type accurately at a modest 40 or 50 words per minute, which I certainly will never be able to do on an iPhone.

    I have an iPod touch--same thing, basically as iPhone--and although I have used it, for example when in hospital, as an Internet and Kindle reader it is not ideal, especially for anyone senior enough to use bifocals.

    The device I would like to see would be in between the iPhone and the iPad mini in size , but with the screen aspect ratio of the iPad mini which is better for reading.

    It would have a folding stand to make it sit up on a table to use as a speaker phone or alarm clock, and would be easily mountable on a car dashboard to use as a speaker phone, or possibly for maps or as a music player or Internet radio tuner.

    It would be chargeable by a mini USB cord and would have a memory card slot for music, etc. and a full size USB slot to allow a full size external keyboard if necessary or connect an external disc drive.

    Come on, Mr. Cook, get busy in your kitchen and cook up my dream Apple pie.
    Jan 31 05:34 PM | 2 Likes Like |Link to Comment
  • How Much Should You Pay For Apple? [View article]
    ".... none of your old stuff will work with the new iPhone without an expensive adapter...."

    One has to wonder to what extent this has stopped people upgrading to iPhone 5, or to buy the older versions of the phone. Could be an impact on profit margins.

    "I still believe Apple stock will drop to the 3's as first quarter earnings will uppercut investors like Mike Tyson."

    I did not know Tyson was long AAPL.
    Jan 31 12:26 PM | 3 Likes Like |Link to Comment
  • How Much Should You Pay For Apple? [View article]
    "In the medium run (2013), I expect Apple to introduce many new derivatives of existing products that will be better than the completion."

    Don't understand this. I wondered if "completion" was a bad typographical error for "competition", but that doesn't make much sense either. Do you mean better than the original product?
    Jan 31 11:50 AM | 1 Like Like |Link to Comment
  • In Defense Of Apple: Battling The Mounting Hysteria [View article]
    Surely what would be more relevant would be how many pay checks consumers received during the quarter in question. Most people in the US are paid ever 2 weeks, so they may get either 6 or 7 pay checks in any given quarter.
    Jan 31 09:51 AM | Likes Like |Link to Comment
  • In Defense Of Apple: Battling The Mounting Hysteria [View article]
    "Yes, Tim Cook is the supply chain expert. The disappointing transition in the iMac line is difficult to comprehend."

    Perhaps most of his time is now taken up with administrative responsibilities? Being a supply chain expert does not necessarily make someone a successful CEO. A CEO needs to have a global perspective and see the big picture.

    It always beat me how Dick Cheney was able to move from politics to being an apparently successful CEO of Halliburton without any prior business experience, but I have to assume that he was concerned with the big picture and delegated the nitty-gritty to subordinates.
    Jan 31 09:48 AM | Likes Like |Link to Comment
  • In Defense Of Apple: Battling The Mounting Hysteria [View article]
    I carry a $10 cell phone for calls plus an iPod for applications. Possibly a slight inconvenience, but considering it saves about $100 per month it is cost effective.

    We will know that margins are bottoming when the iPhone sells for the same as an iPod, which is really an iPhone without the GSM calling, which must cost all of another $10 to add to the device.
    Jan 30 07:28 PM | 1 Like Like |Link to Comment
  • Why Apple's Profits Are At Risk [View article]
    There were two main reasons for falling margins:

    1. iPad minis which are cheaper and have lower margins taking sales from full size iPads.

    2. More people buying older models of the iPhone instead of the most expensive new edition.

    Whether this trend will continue in the future or whether it will be countered by new product lines or expansion into new markets remains to be seen. Clearly there are a limited number of people on the planet who can pay $700 for a new phone (even if the true price is somewhat hidden in contracts).

    On the other hand, possibly Apple will expand more into the enterprise market, something that Cook talked about in the conference call.

    I think we see profit growth slowing down, but I'm not sure it has peaked yet.
    Jan 29 10:06 PM | Likes Like |Link to Comment
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