One of the keys to trading (or investing) is having conviction in what you believe. I have never been the type of trader or writer who gives a convoluted take on where I think a particular stock is going. Please see many of my previous long call buying recommendations on Seeking Alpha, which included trades on EMC Corp. (EMC), Wynn (NASDAQ:WYNN), Apache (NYSE:APA) and others. Have I always been right? Absolutely not. However, many of these will always depend on when someone decides to exit a trade. For example, on March 5, 2012, I wrote an article on how Priceline (PCLN) was due for a pullback. I recommended purchasing put options. The next day, Priceline.com fell almost $21.00/share. At that point, I sold my trade. The put options increased in value so much, I saw no reason to hold it any longer.
This brings me to a point about having a set goal in mind ahead of time before even making a trade. One of the worst traits to have when investing in stocks or options is greed. I have seen very good investors and traders fall hard to this trait: when to let go and be content with your gains.
After Apple (NASDAQ:AAPL) reported earnings last week, the stock shot up past $610.00/share. This was still a far retreat from the $644.00 52-week high it reached, but was a nice comeback nevertheless.
Since then, Apple has again come back down very swiftly. Financial news stations and talking heads are very good at making the world seem as though it might end when Apple's stock price falls, which is pure panic and media entertainment. Apple is a great company. This is not a stock that is overvalued in the least. How many companies can sport a price-to-earnings ratio of 14.23 and a earnings-per-share of 41.04? That is beyond cheap. Here are some other fundamentals:
|Market Cap (intraday)5:||546.01B|
|Enterprise Value (May 1, 2012)3:||535.26B|
|Trailing P/E (ttm, intraday):||14.23|
|Forward P/E (fye Sep 24, 2013)1:||10.83|
|PEG Ratio (5 yr expected)1:||0.65|
|Enterprise Value/Revenue 3:||3.76|
|Enterprise Value/EBITDA 6:||10.05|
|Total Cash (mrq):||28.54B|
|Total Cash Per Share (mrq):||30.52|
|Total Debt (mrq):||0.00|
|Total Debt/Equity (mrq):||N/A|
|Current Ratio (mrq):||1.58|
|Book Value Per Share (mrq):||109.63|
|Cash Flow Statement|
|Operating Cash Flow :||53.07B|
|Levered Free Cash Flow :||30.50B|
Price Target Summary
|No. of Brokers:||45|
If apple is not at $700.00/share by September, I will be shocked. It is also important to remember that China Mobile is only going to increase Apple's earnings-per-share (NYSEARCA:EPS). While Apple notoriously low-balls future estimates, this is actually a benefit to investors, as they almost always blow past these estimates.
Often, when a stock as heavily traded, liquid, and as media-infuenced as Apple has been falls even slightly, there is a natural tendency to panic and follow the sheep. Do not. This stock is going to recover and it will be dramatic. That is a guarantee. I encourage anyone and everyone in September 2012, if Apple is not trading at least $700.00/share, to call me out on this. That is my conviction.
If you are holding stock, I recommend not only holding it, but to increase your position. If you own long calls, I would suggest averaging down if you have taken a hit lately with the stock moving down as much as it has lately. You will be rewarded.
In my opinion, Apple trading at $583.98/share is a complete steal. Panic selling and short traders love this. It is their bread and butter. The January 2013 $620.00 call options are very attractive right now. How long they will stay at their current lower price is not something I will pass up, and I will be adding to my position.
If you have any questions, please leave a comment or send me an e-mail.
Disclosure: I am long AAPL.