The Apple (AAPL) Party Continues

The share price is not the only thing about Apple (AAPL) that has gone parabolic, the media/blogosphere attention has also gone parabolic. The company announced a long awaited dividend for part of the cash hoard along with a share buyback.

George Moriarty collected a long list of Seeking Alpha articles here (George hired me on in 2005, we’ve been friends ever since and now he is working for Seeking Alpha).

I had a similar post recently and the mania around Apple has grown meaningfully since then (well, I think it has). The last time I mentioned Apple it was around 18% of the iShares DJ US Technology ETF (IYW) and now it is 20.9% of IYW. IYW is an ETF we use for some of our clients.

Trying to predict when or how a mania ends is pretty close to impossible other than getting lucky (everyone gets lucky every once in a while) but this will end one way or another as they all do and it would be reasonable to expect some sort of shareholder pain. Maybe this won’t happen until $900 but right here the stock is up 48% YTD which is amazing for what was already one of the largest companies by market cap (now it is the largest).

In my opinion anyone who has made a lot on this stock would not go wrong selling some portion of it right here and continuing to (hopefully) ride up higher. If instead it starts heading lower then you sold at a pretty good time. I view this as a win no matter what scenario.

I have no argument to make against the stock, it has changed the lives of a staggering amount of people for the better and it is tough to envision what will come along to derail the company but figuring that out is not really something a portfolio manager needs to worry about (including do it yourselfers who are their own managers). This would be more for the analysts to figure out.

The reason I say portfolio managers don’t need to figure this out is because they really just need to recognize that there is a mania that has sent the stock up at an unsustainable rate, know that this has happened many times before with other stocks (including AAPL) and deploy some sort of risk management strategy. I prefer the one mentioned above, other people may prefer stop orders, others may want to use options but some sort of protection would be warranted.

About Roger Nusbaum 169 Articles

Roger Nusbaum is an Arizona-based financial advisor who builds and manages client portfolios using a mix of individual stocks and ETFs. Roger writes a popular blog, which focuses on risk management, foreign stocks, exchange traded funds, options etc.

Roger has been recognized by many in the investment management industry for his expertise in portfolio management. Roger has been regularly interviewed by the financial press, trade journals, and television news shows. He has also had numerous technical articles published and has been quoted in a number of professional trade journals, newspapers, and consumer finance magazines. He appears frequently on CNBC Asia as a market commentator.

Visit: Random Roger

1 Comment on The Apple (AAPL) Party Continues

  1. While I wouldn’t question the advice to take profit from Any good investment you have when you feel the time has come, I question the statement that this stock has gone up at an “unstainable rate”.

    What we’ve seen is Apple’s profits continuing to double and triple year over year, with the stock price _lagging behind_ earnings. The P/E ratio is on the lower side at 17. Many other stocks considered good bets hit PEs way above 50.

    And we’re not talking about a “one hit wonder” like netflix or linked-in or a company that really only has one market. Apple continues to _create_ new market segments, including touch-based music players, advanced smart phones, advanced tablets, online music sales, online television and movie rentals… and we’re waiting for the TV to land. Most companies would ‘kill’ just for Apple’s accessory business.

    So this isn’t some speculation stock. In fact, speculation about Steve Jobs, and a lot of negativity and FUD have held back this stock if anything. I am prepared to ride this stock a LOT further before jumping off the wave.

Leave a Reply

Your email address will not be published.