Apple is an interesting stocks to own. Quite frankly though, it might be too hot lately. Many people, probably just like me, got hurt pretty badly for buying the stocks at its height: $700. So there are batch of my stocks are in red. Ah...... Life!
Yet I still sleep well and read SA from time to time. If you were new or uneducated in stock trading, reading SA articles would be a frustrating/surprising experience. There are always people tell you are wrong. So, it's important to understand why people say something before you start to believe.
First thing to remember, SA authors get pay per views. Most of them write an Apple article because there are tons of views. Currently there are 130k people who got updates from Apple. Is it the largest group in SA? Probably so. In my experience, the next largest one is SPY, because of the recent popularity of index fund ETF.
When a stock goes bull, stock bloggers/authors love to dig up success story of a stock and become bulls. At the time when Apple was $700, many people are arguing Apple will go to $1000. Some of them own(ed!) the stocks so obviously the would say so. Some of them don't own the stocks, they said so because the stock was popular and they can get views. There are exceptions of that economics. e.g. I think Bill Mauer is pretty good at his stuffs. But those are exceptions. Many of the authors are opportunists. So following their advices to buy was quite silly.
On the other hand, when a stock goes bear, "Time to lash Apple!" and you can see everyone becomes genius on their predictions. Some said "they predicted a year ago Apple would go down". Once again, the reasons are mainly for clicks, rather than an investigation of truth. If you solely follow their advice, once again, you are making pretty big mistakes.
If you follow Apple, you know Apple has a big fan group. Many of them are fans of Apple for 5, 10, 20, 30 years. So their technological analyses are usually biased towards Apple. When Glass came out, they said, "Glass will not be popular" but when iWatch came out, they will scream "iWatch has huge margin 70%, 80%, 90, 100%!".
So if you just read this group of people for Apple information, OMG, you are certainly very bullish about Apple. Now, do you know that Samsung's Galaxy ad was making an impact on Apple? Do you know Samsung has doubled up last year? You probably miss those information.
Hmm. Android fans, Kindle fans, Galaxy fans, Glass fans. Once again, another group of people who doesn't care how a company runs. They just want their platform goes up. If they were developers on one of these cute devices, they will be benefited. Most of all, they got the bragging right as well!
But do you know Apple still has EPS growth ytoy? Do you know the true story of how the earnings was counted differently in Apple (13/12)?
Some of the silliest persons I know of are very into technicals. RSI? MACD? Moving Averages? From that point of view, Apple is still going to go way down because the chart said so. When they got their prediction right, they self-celebrated and let people know. The other silly people then also follow them.
Technical guys are your real-life palmists, astrologist, numerologist. Just go to read their classic, "Technical Analysis" by John Murphy. You will realize it is not much different from Cheiros's "Language of Palm". In general, the future is a kind of randomness which is very hard to be consistently predictable.
They are pissed! How come Apple doesn't growth as much as they predict? Why it doesn't grow for 20,30,40% and 0%? (As I said, it's due to 13/12 weeks difference. so the number is around 15%) Why Apple let Samsung compete at all?
Who are the growth guys? Believers of Peter Lynch, Soros. Hedge fund managers. Or funds which labeled as growth. Apple was obviously a growth stock.
But then, when you think about it, their demise is predictable. When have you seen a stock grows forever? So one day Apple would go down and some people is destined to feel unhappy.
Now, over the last 2-3 years, there are many people belong to this group. In 2013, their collective regret will continue to drag the stock down. In 2012, the volume of Apple traded was approximately doubled of 2011 or 2010. So what we are experienced right now are simply the shock wave generated by growth people who sell their stocks in panic.
So how do I know funds are leaving Apple? Look at the "Institution own" field in a quote. Around a year ago, Apple was 73% own by institutions, now is only 64%.
They are excited. Apple starts to pay sizable dividend (now ~2.5%) and its P/E is much lower than their peers (Google, Intel, Microsoft and not to say Amazon).
Yet, Value guys has their concerns. They say, "Look at Seagate!". True, Seagate (NASDAQ:STX) 's P/E is 6-7 right now, but it doesn't really go up until recently. So Value guys, just like Growth guys, are circumspect as well. But their mantra is that "it's lovely to buy quality stocks in a low price". So, they are probably just waiting.
Another concern of Value guys, Apple, unlike Exxon Mobile, Coca Cola or P&G, is not selling consumer staples. This particular factor makes man value guys hesitated. Many still decide to enter perhaps because the brand value. (No kidding, who doesn't like to be called with a fruit name?)
* "It is all about random walk and I am going to use whatever method works in backtesting."
Index Fund Guys
* With English accents: "Efficient Market Hypothesis is well known to be the TRUTH of the market. I am SURPRISED that so many people are still trying to do stock selection. " Bogle and his readers. Ben. Graham when he was old.
They have a point, being defensive using index funds doesn't hurt. I hope every reader here has at least some portion of their portfolio in good index funds ETF (e.g. SPY) or mutual fund (e.g. Vanguards family)
The sad thing about Wall Street Analysts is that their dynamics are very similar to SA authors. Their main job is to get more clients to buy stocks. If the reports sounds optimistic, why not?
You might hear about the tragic situation of Andy Zaky, he lost up to 400k of his BullCross clients money. Being an Apple fan as well as in love of high risk was a dangerous combination. They are lovely bunches, and they always have a strategy for you.
Cover calls is okay. It is a technique which reduce risk. Many others, you probably need to understand Black-Scholes formula before you know what you are doing.
Don't follow them unless you do know what you are doing. Reminder: many people think they understand, but they don't.
I have been buying Apple since 2010 through a kind of dollar cost averaging scheme starting at the price point of 220. I hadn't become super rich because I hadn't commit all my money. I also hadn't become Andy Zaky who lost his shirt in the game. I ended up having a modest return when I look at my stocks now. No IRR number but I believe it is poorer than S&P.
Let me back up a little bit though? Am I doing silly things? Nope. My portfolio has 60%+ index funds, I also have assets to balance my stock portfolio. Buying Apple is my conscious move to embrace more beta and get more return. So even though some of my apple was gotten in 2012 at $700 and it drops for 40%. Who cares? It's only a tiny portion.
But this is probably not the situations for many of you. If that's the case, time to rebuild your portfolio. Don't trust your instincts too much. Stock picking could be something risky. You almost always want to "de-risk" it by technique such as dollar cost average. Also don't go into derivatives unless you know what you are doing and you have enough capital.
As for me, I am happy with my Apple positions now, I will buy more when it goes down to $250, $150 or even $100 and up to $600, $800 and $1000 unless I hear any scandals in management or any bad decisions were made.
Also if Apple becomes a pyramid scheme (just like ???), I am going to dump it as well. Oh! I am just joking, Apple is making sh*tload of money. They might be slowing down (for this year) but it doesn't look like that's the case. Given that I decided to accept the beta (risk), buying them is such an irrational decision.
A kicker: I also don't know who I am from the above cases: Am I a value guy/growth guy? I also don't know the right timing to buy Apple. Sorry I can't predict them. So here goes dollar cost averaging. It's time-proven way to reduce risk. Sounds good to me.
So why am I telling you all these? Do I get any benefit out of it?
Nope. I am not an SA, theStreet author. And hey I only do it for fun. My investment advice can be good or bad. In fact, perhaps the only positive reasons why I write this up, is that I got a bad cold today and have nothing much to-do. All these knowledge are basic mathematics, investments and psychology. Hopefully, you enjoy it as I do.