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Brian Grosso
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Investment Manager at Rugged Group LLC, an independent, fee-only registered investment advisor based in New York that I formed in August 2015.  My firm's investment approach can be summarized in the same four, one-syllable words that Walter Schloss famously used: We Buy Cheap Stocks.... More
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  • No News Is Good News For Apple 0 comments
    Apr 14, 2013 1:52 PM | about stocks: BBRY, GOOG, AAPL

    The Most Followed Company in The World

    Most of you who are reading this article scrutinize Apple (NASDAQ:AAPL), keeping up on the company on a daily basis. Apple is the most heavily covered company in the world. One doesn't have to go very far to figure this out. Right now on Seeking Alpha, about 145,000 people get email alerts for Apple.

    Provided by Seeking Alpha

    The next highest is Google (NASDAQ:GOOG) at 60,000 subscribers, less than half that of Apple.

    Provided by Seeking Alpha

    As far as analyst coverage, Apple also wins by a long shot. A quick look on Yahoo Finance revealed that 48 analysts' estimates were included in Yahoo's analyst consensus for Apple versus 36 for Google.

    Provided by Yahoo Finance

    All these people watching the company have been pretty bored for the past month and a half as very little new information has come out about the company. The company hasn't filed a report of any kind with the SEC since March 1st and it is well known to be one of the most secretive companies out there today. Apple started becoming very secretive under Steve Jobs to protect leaks of innovative information and possibly delay copy-cat product development from rival tech firms. The strategy has been very effective and so the company continues to operate that way.

    The lack of factual information has led to hardcore rumor spreading and speculative discussion among Apple followers. I find this unsurprising. I figure when 150,000 people have interest in the same thing and are all easily able to communicate with each other through a medium (Seeking Alpha), they are bound to find something to talk about.

    No News Is Good News

    My problem is not that rumors are being spread, its the contents of some of these discussions. I've read various articles that claim that for Apple, no news is bad news. The support for such claims is that Apple needs an innovative product now or it will be doomed to declining margins and profitability.

    While I agree that Apple does need a new product to continue to grow, I think it is ignorant to think that the company isn't working on something big right now. Apple spends $1 billion on R&D per quarter; the company better be working on something or I want my money back! CEO Tim Cook also gave a few tip offs of innovation to come in the company's Q1 earnings call. In response to a question about innovation at Apple in general, he said the following:

    We are working on some incredible stuff. The pipeline is chock-full, I don't want to comment about a specific product, but we feel great about what we have got in store.

    Later on, Gene Munster from Piper Jaffray asked Cook specifically about innovation in the TV market. His question and Cook's complete answer are below:

    Gene Munster - Piper Jaffray

    Hey good afternoon. Tim, you made comments in the past that the Apple TV experience is dated and Apple wants to fix that problem, if we can take a step outside of the form factor debate whether it's a box or can you just talk in high level how important this market is to Apple, number one? And number two is can you accomplish what you ultimately want to accomplish with the reality of where content is today, and how content is distributed?

    Tim Cook - Chief Executive Officer

    Gene you're asking me all questions I don't want to answer but let me see if I can find some comments to make that productive. In terms of the product that we sell today, the Apple TV we sold more last quarter than we've ever sold before, eclipsing 2 million during the quarter. It was up almost 60% year-on-year and so there is actually very, very good growth in that product and what was the small niche at one time the people that loved it is a much larger number some of it, I have said in the past this is an area of intense interest for us and it remains that and I tend to believe that the, there is a lot we can contribute in this space and so we continue to pull the string and see where it leads us but I don't want to be more specific.

    Provided by Seeking Alpha

    I had heard rumors about the 'iTV' up until then but when I heard Cook say, "You're asking me all the questions I don't want to answer," I really began to take them serious. I think Cook side-stepped the question because, as I mentioned before, he and the rest of executive management at Apple are committed to keeping their mouths shut on innovation. They're probably legally bound to do so. The company is that serious about it.

    Given that the company has always been secretive of what it is working on, along with the increasing R&D expense and certain tip offs from CEO Tim Cook, I think it is very likely that the company is on the verge of something huge and that those of us that are long just need to be patient and not let the negative rumors sway us from our convictions.

    There Was News After All

    As I said before, very little factual information has come out of Apple in the past 6 weeks or so. There has been news though, it just didn't come from Apple.

    On March 14th, nearly a month ago, Samsung presented the much anticipated Galaxy S IV in New York City. There has been much argument as to whether the S IV is better than the iPhone 5, but one thing is for certain: it could have been a lot worse. Many investors sold out of Apple before the S IV release expecting the new phone to blow the iPhone away and steal market share. Clearly that is not the case. Regardless of which phone you prefer, it seems clear that the phones are both competitive with each other; the iPhone is far from a complete loser. The Friday following the Thursday night of the S IV release, Apple stock jumped up and Samsung stock fell. That's Mr. Market's opinion on the debate.

    The Blackberry (NASDAQ:BBRY) Z10 release was very similar to the S IV presentation for Apple. The Z10 was finally released in the US on March 22nd. Sales were initially less than expected and the product received less than stellar reviews. According to CNET, the Z10 is "not quite enough to draw committed iPhone or Android owners." On the day of the release, Blackberry stock dropped nearly 10% and hasn't rebounded since. Apple stock also jumped on this day. Another hint from our good friend Mr. Market.


    Despite very little factual information regarding Apple coming out in all of March and April until now, there have been several bullish signs for us investors to pick up on. It seems that in March and early April, no news was good news for Apple. We'll have some news coming soon though in a few weeks on Tuesday April 23rd after the markets close as Apple will release its Q2 earnings results. I look forward to the day. It's about time we got something to get excited about!

    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.

    Stocks: BBRY, GOOG, AAPL
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