Apple Stock Becoming The Ultimate Safe Haven

| About: Apple Inc. (AAPL)

Summary

Apple share gains increasingly mirror the major averages.

Apple has become a safe haven - safer than even the dollar - in times of volatility.

Apple gains will slow as the risk-on trade reappears, but looks smart when it's risk-off time.

At a time of volatility, like today, investors always look for a safe haven, a "risk-off" trade.

Usually they find it in the U.S. dollar. The greenback can absorb vast amounts of capital. And the dollar has done very well, while oil has soured the last few months.

But the dollar, while safe, doesn't guarantee a return. As oil prices have fallen, yield curves have flattened. The game of parking money in bonds, even in long bonds, is no longer a guarantee you can beat general inflation.

But there is one currency that does have float, does offer the hope of capital gain and does provide safety for investors. Apple (NASDAQ:AAPL) stock.

Since it last announced earnings in October, Apple has become the ultimate safe haven. It's up 13% since October 15 without offering any news. That has beaten both major averages, while oil is down 29%.

Apple's market cap of $664 billion entering trading Friday offers plenty of liquidity, its yield of 1.68% offers the equivalent of interest and its moves this month increasingly mirror the Dow Jones and NASDAQ averages. While the Dow is down .1% over the last month, AAPL is up 1.75%.

Apple has reached that rare part of the investing stratosphere where it's no longer trading just as itself, but as a proxy for other things. It's a proxy for the U.S. economy and for the general idea of technology. At a time of intense volatility, it is a good place to be.

But as with all safe havens, that's not always going to be the case. When the "risk-on" trade appears, when greed overtakes fear, Apple stock is going to suffer, despite its fundamentals. Its market cap then becomes too large to grow as fast as investors might like. For instance, in the last week, as investors have rushed to retailers like Lululemon (NASDAQ:LULU) in hopes of big gains, Apple shares have slowed, and are down 3.35% for the last five trading sessions, against a 1.7% fall in the Dow and a 1.3% fall in the NASDAQ (as of Thursday's close).

Being a safe haven, in other words, has consequences.

Just as you want to keep some of your portfolio in cash while seeking a return in the broader market, you now want to keep some of your portfolio in Apple while seeking a greater return elsewhere. It's stronger than the dollar, far stronger than oil and will keep your money safe.

Don't expect the kind of full-year returns - almost 40% - you have gotten this year going forward, but do expect safety that makes you look smart whenever the risk-off trade returns.

Disclosure: The author is long AAPL.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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