Wednesday, February 15, 2012

I Am Out

I don't mean to make this a trading journal or stock buy/sell recommendation site, but I thought I'd mention that I am a bit less enthusiastic about AAPL now as the world seems to be quickly agreeing with the bullish views.
I never intended AAPL for me to be a long term investment as it is in the quick changing world of technology; today's AAPL is tommorow's Sony or Motorola. 

But I owned AAPL for the simple reason that it was so darn cheap for a company doing so well.

Now I think it is less so.  I think AAPL is still easily worth more than $600 (15x trailing eps plus cash and investments per share; see my earlier posts on AAPL).

I think now, though, the market is catching up and the stock is up a lot on rumors of a dividend, new products and things like that.

Even at the outset, I never would have considered owning AAPL at a 'normal' valuation, of say 15-20x p/e.  I only bought it because it was below 10x p/e.

If this was intended to be a long term hold for me, I would not sell just because the stock price moves up a bit.

But since this is not the case, I have no problem selling out now.

The problem with technology is how quickly things change.  Apple has had a good run from the iPod to iPhone to the iPad.  It's an incredible run.  I have no reason to believe they won't have another superhit, but I tend not to like owning companies that depend on them, unless they are supercheap.  (The iPad may still be in the early stages too).

I believe that in three to five years and certainly in ten, these products will all look more or less the same.  Of course, at that point in time AAPL may have another game-changing product.  But again, I wouldn't want to depend on that in my stock holdings.

The Apple stores are great and they do very well but that's largely due to Apple's success in launching amazing products.  What happens when this run ends?  What will they sell at these high rent stores?

These are things I have no real visibility on.

For Apple fans, though, the stock is certainly not expensive so holdings shares should be fine.

For me, though, I am out  (around $523.50).  


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  2. Any updated comment on AAPL today in the high $420s today? It looks cheap, and I would normally jump in head first on a buying spree, but your Land-Jobs analogy is giving me pause.

    Look forward to hearing what you might be thinking ...

    1. Hi,

      I actually got back in after this post and rode it up a little and then played it from the short side late last year and this year.

      It does look cheap, but the further you look out, the harder it is to assess the situation. I doubt AAPL will end up like Polaroid (broke), but it does have to come up with something big to keep earnings at these huge levels.

      Druckenmiller was on Bloomberg TV and he mentioned the difference in margins between AAPL and Samsung. He implied that AAPL margins can't be maintained and over time will get down to Samsung-like levels (even if not all the way down).

      So that is a concern.

      I thought this whole Einhorn/cash thing might be a catalyst for a rally, but that hasn't turned out to be the case.

      So my personal opinion is that this can be played from the long side more like a trade than an investment.

      But again, that's just my feeling and this is a really hard one to call. I can sleep well at night without AAPL in my portfolio so...

      Thanks fro reading.

    2. Thanks for giving your opinion - I feel like when I'm a patient, I like to ask the doctor what he'd do ... and judging from your track record (and mine!), I'm confident in placing you in the role of the doctor - one whose opinion I respect, but I'll also do my own due diligence, since it is ultimately my financial health at stake.