Worrying Wednesday – How Low Can Apple Go?
I had to do it.
I had to commit to AAPL as our "One Trade" for 2013. I didn't want to do it but there wasn't a stock I felt more sure about beating the market over the next 12 months. The icing on the cake was the drop to $485 (even as I write this, I can't believe the price) on the same afternoon I was scheduled to be on BNN to announce the trade (see full interview and all 3 trade ideas here).
Had AAPL gone up $40 instead of down $40 (a 15% swing), I would not have done it but – COME ONE – $485? Are you freakin' kidding me? At this price, we're even adding AAPL to our conservative Income Portfolio – so far it has rightly only been placed in our more active and riskier portfolios but our "One Trade" idea for AAPL is a nice "set and forget" play on the stock with a great return on cash and margin and the "downside" of owning AAPL long-term at net $364 (another 25% off and 34% off our $555 short-term value target).
As the average analyst estimate for AAPL is $728 and the lowest analyst estimate (by the so far, so wrong Ed Zabitsky) by a mile is $270, we feel pretty good about our net $364 entry and, at $270 – we'd love to double down for an average of $317 – down 14.8% at the Zabitsky Line- where AAPL's cash on hand would be about the same as it's market price. So, if you REALLY want to own 2x AAPL for net $317, our One Trade entry at the current $485 price is for you!
Sorry for more AAPL talk but, as I said last week: "If they were selling brand new Range Rovers for $40,000 – I'd talk about what a good deal those were all the time as well." As it is, it's AAPL stock that's on sale, underperforming the S&P by almost 30% over the past 6 months – AND IT'S PART OF THE S&P – so that's REALLY awful performance (see Dave Fry's chart). Will it continue for another 6 months? Another year? And, if AAPL doesn't continue to underperform the S&P for another year – then won't it, ipso facto, OUTperform the…
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