AAPL: The Gap Low Is Still Key
August 5, 2008 10:09 PM
I mentioned within probably 30 minutes of the gap down on AAPL that the “gap was bought and traders were likely to be long above that low”. Nothing has changed my view on this and have mentioned as much at least once more. Will have to be careful long on “new highs” however. If the market retreats without making new highs, then that is the number $146.53.
AAPL Gap Low Was Bought
July 22, 2008 11:04 AM
AAPL has done much the same as the market. The opening lows were bought. Today’s low is likely key for the day. Traders are “likely” to buy above that low, IMO. But that is similar to the overall market.
AAPL: Watch The Gap
July 21, 2008 11:50 PM
AAPL is likely to make a huge gap down. If you are long the stock, watch the gap “reaction” off the early high to see if you are in big trouble. As I have mentioned more times than I have fingers or toes, being long or short these type of stocks into earnings is gambling, IMO. If they had not warned, the stock may have moved the other direction as they soundly beat. But warn they did. If there was no earnings, the stock would be a short anyhow as I said before, it had to hold $164, IMO. It didn’t.
Probably a bigger issue for AAPL is the health of Jobs. He is Apple. Until that issue is clarified, there will be doubts surrounding the stock. I had totally forgot that he had cancer years ago. Without Jobs, I have no idea how low the stock could go as people (myself included) consider him a man with vision.
I do not own AAPL, and have no vested interest in the outcome of the stock, but I sincerely wish him the best. He seems like a good dude to me. There are certain people that I hear speak and just think, he is a good guy. Like the CEO of Starbucks. He seems like a genuinely good guy that cares about both the company and his Starbucks employees. Anyhow, if there are issues with Jobs health, and these are just pure speculation based upon his past health issue, my prayers are with him.
Stock View: MSFT - Simple Question: Why Buy It?
July 17, 2008 11:26 PM
I have been very negative on MSFT for a long time. The reason is very simple. Why buy it? Their money is made on two products, Windows and Office. Both of these products were made over 15 years ago, with slight improvements over the years. They have done zip since and I mean nothing. This is paramount to a company having a “cash cow” that invented the typewriter. The cow will eventually die.
When examing a stock for an investment (not a trade) you have to ask yourself a simple question? Why buy it? Does the company have something that will increase revenues long term or are they reliant on past success? If they are reliant on a past product, can they increase share with that product? If they cannot increase share and they have nothing else in the “pipeline”, then what is compelling enough to invest in it? Remember my view on this issue. Fundamentals matter, valuation does not. Good fundamentals can make a very high PE cheap in time, poor fundamentals can and will do the opposite, over time. MSFT’s fundamentals strongly suggest that the stock will move with the global economy at best, and gradually decline over time with increasing alternatives to Windows and Office, at worst - unless they create a huge winner and soon.
If AAPL had decided to allow other companies to license their software in the 80’s, MSFT would possibly not even exist today. It certainly would not be a giant. That is the only misstep (albeit probably the largest mistake in the history of business) that Jobs has ever made. If you recall the 80’s, using a MAC was a gift compared to using a MSFT based pc. Windows’s based pc’s were inferior on all levels and it wasn’t even close. It was literally like driving a Yugo vs a BMW. They won the battle only because of licensing. The Appleheads would say this is still the case. Then again, so would many tech experts.
MSFT has had argunably one success in the last 10 years - the Xbox. Good call. But this is just a stand alone product. It isn’t a vision of integration and isn’t on the scale of what could have and should have been accomplished in the last 15 years. ITunes, IPods and then the following IPhone is a vision of integration. They all mesh together and all increase the desirability of not only the two, but also an increased desire for Mac’s. They are all part of a grand plan as I see things. MSFT seems totally reliant on the economy because their sales of “exisiting” products are based upon global demand of PC’s. They aren’t creating demand. This is not good, especially in this economy.
MSFT’s “vision” is apparently to takeover Yahoo? Another company that also cannot figure out how to properly monetize and advance their once dominate position? I don’t get it. Perhaps they have a grand scheme or revolutionary product that we are not aware of, possible. But if they had a plan, would they be looking to buy Yahoo? I would think not.
If coffee has been banned at MSFT and replaced with bottled water, not only do I strongly suggest getting the pots back in action, they need to double bag the next few pots. They apparently are asleep and have been for quite a long time. This review may seem a bit harsh, but these people are making many millions of dollars to lead with VISION. And they aren’t, obviously.
AAPL: Be Careful Much Higher
July 7, 2008 11:16 PM
AAPL chart says long above $164 and short below $192.24. So this is a tight range (for a stock like AAPL). I am concerned a bit about valuation but far more concerned about the overall market. For the valuation followers, on a PEG basis AAPL is 60% higher than RIMM. So for anyone that believes RIMM is grossly overvalued, you have to believe the same about AAPL. Personally, I do not much believe in valuation unless it gets to an obvious extreme. Even then, you HAVE to wait for a signal to short, IMO.
This is why I just do not believe you can trade on valuation. If RIMM and AAPL had the same exact PEG, RIMM would be over $180 or AAPL would be near $90. Take your pick. I know I have beat this topic to death, but you can see that the market is not rational. Stocks do NOT trade on valuation, at least for short term, meaning a year or more. The ONLY reason RIMM is falling is they warned on earnings because of marketing and R&D related to new phones. Now the RIMM chart looks ugly and it is in trouble, chart wise. If they had not, RIMM could easily be $180 here. Would RIMM be overvalued at $180? Probably. Does it matter? No.
Point being, people can easily make the argument that AAPL is grossly overvalued here - but it can go much higher. I just think there are easier trades on the board. Why fight the between “this and this” battle? Let others do it and move on to something else.
I gave three FAR easier trades today, IBM, BMC and JOYG. All three were winners in a down market. When stocks get “in between numbers”, why not just leave them alone and trade something else where there is clarity? I see no reason to fight a tough battle until you see who wins. Move on and let other’s fight it out.
RIMM, AAPL And GOOG: Are They Really Overvalued? The Answer May Surprise You
July 6, 2008 1:40 PM
I have been looking into RIMM, AAPL and GOOG lately to see if they are truly “grossly” overvalued. I assumed all three were before looking at the data, and the answer is not as clear as one may think. The answer is yes, and no. If the economy holds up then RIMM is possibly undervalued, for instance. But will the economy hold up? That is the thing we do not know for certain. My personal view has long been no.
RIMM’s PE is high at 42, but the forward PE is less bubble like at 30. More importantly, according to SmartMoney.com, the PEG ratio is .81. If you recall, Peter Lynch’s mantra was that the true value of a stock was a PEG ratio of 1.00. Therefore, if you believe in his reasoning, then RIMM is undervalued at $115, believe it or not, by a whopping 20%. It would be considered a VALUE stock using his valuation methodology at this price.
This is why I have long cautioned against trading based upon “valuation”. RIMM could easily go to $90 here, or it could reverse and go over $150 just as easily. Which value is correct? The answer is that either is correct if that’s what the market says it is worth.
Let’s look at another “high flier”, AAPL. SmartMoney estimates AAPL’s PEG at 1.44. Therefore, according to the same valuation theory, AAPL is overvalued by over 40%. Should AAPL be shorted based upon this metric? Absolutely NOT. It was trading at a PEG of near 3.00 last year. Shorting on valuation is not only dangerous, it is begging for bankruptcy. Wait for a signal to short stocks that appear overvalued, not blind short them. On the other side, should RIMM be long here because of the low PEG? Absolutely NOT. It could go far lower. Wait for the market to signal a bottom.
Another stock that always “seems” overvalued is GOOG. Looking into the numbers of GOOG, it has a PEG of 1.03. That surprised me as I have always “assumed” it seemed pricey.
Point being, the market can trade stocks at PEG ratios of .75, 1.5 or even 3.00. There is a HUGE difference between these numbers, rather obviously. If RIMM had the same PEG as AAPL it would be about $180 currently. Is the stock worth $90 or $180? I have no idea. It is worth what the market says it’s worth. In addition, if RIMM had the same peak valuation as AAPL, it would be well over $200. Blind shorting these stocks is very dangerous because of this possibility. If you want to be short them, wait for signals.
On the other side of that, I would personally never buy a stock just based upon the PEG. The reason for this is that analysts tend to extrapolate data into the “forever”. Huge earnings growth rates never last forever, but the PEG ratios always assume they will. Look at PEG for indications, but also, and more importantly, look at what the market is telling you. The market will decide the value of a stock, each and every time. Like it or not.
PEG Caveat: In this economy you cannot rely on PEG ratios, PE’s or any valuation mechanisms. The reason for this is if we enter a severe recession, all numbers are inflated. PEG assumes growth rates will continue. PE’s assume earnings will not fall. If we enter a severe recession, obviously both growth rates and earnings will fall. The big question is how bad a recession and how long.
Lastly, if you want to simply make decisions on so called “valuation” you are on the wrong site. I make calls on 3 day trades, not long term investing. I do make fundamental calls when I am reasonably certain the market is wrong, but in general, my calls are trades, not 5 year investments. I cannot predict 5 years down the road.
AAPL: Trying To Hold $165.31
June 24, 2008 1:35 AM
Normally I would say long AAPL on further weakness tomorrow above $165.31. My concern is the Fed coming on Wednesday. I just smell big trouble coming, but could be wrong. If you make that trade, have stops in. I have zero confidence in anything, especially long, going into the Fed. News is ugly, what they will have to say will be marginal, at best. There is no good news within 800 miles of the U.S in any direction. Ohh, and AAPL is overvalued, IMO. Not that I care much about facts when it comes to the market.
AAPL: It Would Be Justified To Retest $165.31 Here
June 19, 2008 1:10 AM
AAPL has to hold $165.31 I believe or it may retest $145. I have long warned being long the stock up near the highs, but people buy it anyhow. If we clear today’s high, it should spike and should be an easy buck profit to the upside for a day trade. Free money is ok, even if small.
If it cannot clear, then a retest of $165.31 is in order. If that clears, then much lower is likely. Obviously, the overall market may dictate the outcome. I still believe this is the worst possible sector to be in - U.S. dicretionary. The ONLY reason it is holding is that it is APPLE.
AAPL: Friday Low Has To Hold
June 16, 2008 10:37 PM
Sorry, I did not look at AAPL since Thursday. The Friday low was key and the trade was long today above that low. Sorry about that. I am a one man show trying to save the world from the talking heads and only have so many hours in the day. That is why i have encouraged readers to post a comment to remind me to look at something they have interest in. The trade long AAPl was rather easy as the market gave a firm number to trade today.
AAPL Gets Crushed As I Warned Tuesday
June 12, 2008 11:37 PM
AAPL got completly hammered today as i warned Tuesday in this AAPL post. I said then that “I do NOT like the lows, but i do like the highs” and being long AAPL “you were begging to donate your money”. It finally got the hammer as I thought was coming, down $7.55 or 4.18%.
I had also previous warned that “there was nothing to stop any fall all the way to $144.54″.
If you took heed to my warning then good job. If you are long, then well, next time perhaps listen, lol. It wasn’t me that was saying it was likely going to get torched, the market was saying it, I was just watching and listening - and letting you know what I believed the market was telling me.
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