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Apple Trouble

|Includes: Apple Inc. (AAPL)

I believe that this will soon be a buying opportunity, as the reasons why the stock has tanked can be explained:

Taxes: Many investors and fund managers who were in Apple and have booked paper profits, are selling before the year's end because their profits will be taxed at a lower rate now versus in 2013. Also fund managers are typically keen on locking in profits for their clients before the end of the year.

China: The lukewarm reception is deceptive. It is mainly due to the fact that many Apple products are sold by re-sellers in China, and not through the Apple stores. Furthermore I-phones sold in Apple stores are tied into contracts with only two smaller service providers. If/when China Mobile cuts a deal with Apple, the I-Phone will have access to the company's 700 Million subscribers... The reception of the I-Phone 5 was stellar in other parts of Asia.

Competition: Samsung and other manufacturers of Android based products, are perceived as a competitors. While it is true that they have gained some ground, neither one of them has the kind of eco system, and ease of use, in place that keeps many Apple users loyal to their brand.

They have lost their mojo: The fact that Apple has not come out with a new game-changing product since the death of SJ is seen as a weakness, but I believe that Apple is busy developing not only new products, but also streamlining their operations. Word has it that Apple has invested $ 10 Billion in a chip manufacturing plant in the U.S. A proprietary chip will make Apple less dependent on Samsung, and will be an opportunity to widen the moat Apple already has, being that both its software and hardware are developed under one roof. Apple might also manufacture at least one of their products (IMac) in the U.S. soon, which will go a long way with Apple fans - or other - from the U.S. This, in my view, would be pretty good timing, as economists are already predicting the re-emergence of American Manufacturing.

Booboos: Yes the mapping glitch was a problem, but Apple has weathered little problems like this before (antenna, a few years back). I-Pad Mini Screen (not retina). Well, I could not agree with that one more, as it prevented me from buying a Mini. But word has it, that Apple will come out with an upgraded screen on the Mini rather sooner than later, because they have found a supplier who has the technology to make the Retina screen, and still keep the weight of the Mini down.

Apple TV: Lots of talk, no action... Well I think that will change, as it is clear that Apple has been spending major resources on developing this platform for a long time. Again, the delay is probably due to difficulties to get everybody on the same page. But in the end money talks, and content providers will cut a deal with Apple if that translates to long-term profitability for their companies. TV is archaic in its present form. Apple is uniquely positioned to change that.

Disappointing earnings: True, earnings came in lower than expected, but they were still very, very good, and are likely to be stellar again once the numbers from sales during the holiday period are available.

On the upside there are lots of areas where Apple will gain ground, such as the institutional markets, i.e. education, corporate and government. Both my teen-aged children were issued an I-Pad by their schools (loaners) this year. Regarding China Mobile, that's a wild card, admittedly, but, as both companies will profit from a deal, I am confident it will happen, at which point you will probably see AAPL gaining 10% in a day...

At the end of the day, Apple products on the whole are premium products. The margin on those products is a lot higher than the margin on products sold by Apple's competitors. So far Apple has been successful at keeping the quality, and desirability of their products up there, in a league of their own. Of course $120 Billion in cash isn't something to scoff at either...

I believe that at this particular time there is a confluence of negative news that has lead to - a typical - overreaction among investors (the pendulum factor). Add disappointing earnings to the equation, and you have a perfect storm, but - you know - when there is blood in the street.....

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours.