Profiting From Apple's iMac Launch Tuesday

| About: Apple Inc. (AAPL)
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By Carl Howe

Are you wondering how you can profit from the all-but-certain refresh of the iMac Tuesday? I am too, so I thought I'd do a bit of research.

I took a look at the closing stock prices of Apple (NASDAQ:AAPL) stock for the day before and five business days after four iMac launch events:

1. The launch of the original iMac on August 15, 1999
2. The launch of the iMac G4 on January 7, 2002
3. The launch of the iMac G5 on August 31, 2004
4. The launch of the iMac Core Duo on September 6, 2006

[Click on the graph for a larger version]

I chose those events because I judge those to be "significant" changes in the iMac line, both in packaging and processors. I didn't include changes in screen sizes, such as the introduction of the 20-inch and 24-inch iMacs.

If we view the closing price on launch day as "L", here are how stock prices changed as a percentage of L:

Event L-1 L+1 L+2 L+3 L+4 L+5
iMac G3 +0.7% -0.3% -0.6% -2.8% -2.8% -2.1%
iMac G4 -3.4% -1.2% -5.5% -7.3% -8.1% -7.7%
iMac G5 +1.1% +3.9% +3.4% +2.1% +3.7% +5.3%
iMac Core Duo -2.0% +4.0% +3.6% +3.5% +3.7% +6.0%
Average -0.9% +1.6% +0.2% -1.1% -0.7% +1.0%

Said another way, on average, AAPL stock has declined almost 1% between the close of the day before the launch and the close of launch day. But when we look after launch day, Apple stock tends to rally on average about 1.5% on the day after, and five business days after, even though it typically has a dip in price after day 2, the stock recovers to be up about 1.0%.

As an aside, the launch of the iMac G4 certainly drags down the averages. For those unfamiliar with the product, it was facetiously referred to as the iLamp because of its round base and adjustable screen. Today, that look is iconic for the early iMacs, but many analysts predicted it would be a disaster in sales, and the stock price tended to follow that prediction. But if we eliminate that launch, the averages are considerably higher as shown below:

Event L-1 L+1 L+2 L+3 L+4 L+5
Average w/o iMac G4 -0.1% +2.5% +2.1% +0.9% +1.7% +3.9%

To me, this says that there are actually a fair number of people who sell on the day of the actual event, but then another tier of buyers step in the day after the launch. But overall, the data says that going long Apple stock or call options on the day of the launch and then closing that position either one or five business days later is historically a winning trade.

As always, past performance is no guarantee of future results, but it's always good to know if you're working with or against history.

Full disclosure: the author has a long position in Apple stock at the time of writing.