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What Makes You Think Apple Is Falling Apart?

|Includes: Apple Inc. (AAPL)

It was crazy that Apple went up 80% last year. It is crazier that people say "Apple is falling apart" in last 3 months.

Don't listen to the noise for just a moment. Look at the cash reserve. Look at the P/E. Look at the revenue increase year-to-year. Look at the business. Just look a little bit deeper.

What makes you think Apple is falling apart?

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Or let's ask this question hypothetically. Suppose some crazy rumors caused today's Apple stock price suddenly plunge to half. i.e. $250 but sales, revenues and all the fundamental are the same. Effectively the P/E will become ~5.5 and forward P/E would be ~5.0.

Would you a) sell all your AAPL? b) buy more AAPL?

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And why do you care what analysts are telling you? Are you sure they know what's going on? Look at the Namura's piece. It doesn't take more than a day for someone to debunk it. And look at the numbers, does it really look like Apple cut order by 50%? When you scrutinize the number, it's more like 20%. It is Q2. So why the panic?

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Lastly, "The Law of Large Number". You better check your finance text book again. The Law of Large Number is a statistical law and has nothing to do with the size of the company.

You can say, "because the company is getting bigger, it is getting more scrutiny by the government." or "because the company is getting bigger, it is getting more inefficient." But which Mathematical law said when a company is bigger than $X, it bounds to fail?

Don't be stupid.

By the way, I am particularly annoyed by this point, because many purported professionals think "The Law of Large Number" is the Achilles heels of AAPL. You got to be kidding me.

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There is one legitimate concern of Apple is that it is selling gadgets and it has competitions. But some geniuses are saying "Apple is going to get wiped out by competition". That's simply not true. Looking at the valuation of Apple, if you compare to the industry, you should only have one conclusion: Apple is undervalued now.


Disclosure: I am long AAPL.