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Apple, Inc. (AAPL). It's one of those stocks. One you wished you owned a lot further back in the time line. Well, not all of you wish that. Some actually own it and are sitting on an awesome paper profit. I can assure you a friend of mine is quite satisfied with his long-term position. It's been an interesting session for Apple. First, according to our Analyst Calls piece, there was a positive initiation on the tech concern. Second, the stock hit a 52-week high of $275. Can you believe it, $275? Incredible. And the option action has been notable.
Question is, should you add the company to your portfolio? Does it make sense to buy at this point considering the run-up the shares have experienced over the last year? There's a bear market going on, after all, and you've got be cautious (heck, I was cautious on the thesis back in October).
This is one of the more perplexing conundrums on Wall Street. Actually, many out there would chide me for expressing such sentiment. Don't have faith in Steve Jobs? Are you kidding? The believers in this business can be rabid in their defense of the idea.
I'll say this: Technically, the stock looks great. You can't deny the strength of the situation. It's working when many other companies aren't. Valuation is a little on the expensive side, but then again, you might argue that paying a premium in this case could be worth it.
Here's what investors could do with Apple. To begin with, consider it a high-risk stock; that way, you go in with the correct attitude (i.e., don't buy too many shares at once and keep the investment at a low percentage of your overall holdings). Retain cash on hand for dollar-cost-averaging. And if the stock flounders, be ready to sell covered calls as a way of generating income if necessary.
You just can't fight Apple right now. But don't fall in love with it. Since it's come a long way, you have no choice but to act in a conservative manner, in my opinion, if you do decide you can't take it anymore and need to get in on the action.
It looks to me like the stock is heading for $300. I'd be surprised if it didn't reach that level within several months. But the market doesn't care if I'm surprised or not, keep that in mind.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
6-18-2010 @ 7:48PM
Average White Boy said...
The usual attitude of what goes up must come down. Apple has three hits in a row and a fourth is unlikely. Apple won't acquire another company to keep expanding. Steve Jobs will eventually have to step down as he ages.
If Apple gets into the ad business won't it be able to sustain revenue from mobile proceeds? Why is it that very few people questioned Google going to $1000? Of course, it never made it and probably never will. Apple is going to be opening a lot of stores in China and that could expand its consumer market quite a bit. I really don't understand why people think that Apple is just going to roll over and die especially if the economy starts to pick up and the bear market goes away.
6-19-2010 @ 12:33PM
Mike Sanders said...
I was predicting $300 per share, six months ago... Although caution is warranted, due to the overall market, I am upwardly revising my estimate to $350 per share (in six months from now).
Many thought that the Bell System would crumble, when Alexander Graham Bell passed on. This has not been the case. Over 100 years of regulation and deregulation have managed to balance telecom (AT&T), into a thriving industry. I would welcome a slight bit of regulation, at this point in time, however. We don't want to see Apple corner the market, as Microsoft has done. The FTC needs to read up on the history of telecommunications and regulation / deregulation.
Disclosure: Currently, I do not own any shares in Apple or it's supply chain.
6-19-2010 @ 2:04PM
Terry said...
I currently own Apple shares and also beleive that the stock will hit 300 and over. This company has proven itself over and over again with stunning new products never imagined by other companies. Steve Jobs has surrounded himself with very talented people who are not going to stop being talented anytime soon. Why is it so hard to believe a company can be continuously successful? I'm only sorry I didn't keep the Apple stock I bought 3 years ago and didn't buy more when it was under $100. If any employees of Apple want to donate some of their stock options to me that would be great.
6-25-2010 @ 3:55AM
Sheldon L said...
Steve,
You have expressed some very sensible ideas. People forget the Apple III and Lisa were duds and so was the Newton. The cube got no traction nor has Apple TV after years. Maybe its day will come but that day is not today.
Even companies like HP, IBM and Xerox have faltered at times and we have just witnessed Toyota's rude awakening only a year after becoming the largest automaker. Apple has faltered more than once. Investors should weigh AAPL against the broader opportunities available to them.
The idea of dollar cost averaging is wise if one is determined to invest, I hope readers will take heed.