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Getting Antsy About Apple?

What to do with Apple (NASDAQ:AAPL) is a question on every tech investor’s mind right now — including me. After all, I’m long AAPL stock and shares are rapidly approaching my entry price. Almost every day I ask myself, “Man, should I get out now before my position goes red?”

Then I take a sip of coffee and move onto other things … because I’ve learned one painful lesson as an investor that is truer than all others: People just trade too freakin’ much. So I’m taking my advice (recently stated here and here) to just relax and keep my hands off the trigger.

But for those of you who simply can’t help themselves, here’s some of the Apple news and numbers I’m looking at:


  • Short-Term Momentum: Apple stock pushed to a six-month low this week. It’s down more than 25% since mid-September.
  • Technicals: The stock seems to be drawing a textbook head-and-shoulders pattern (this chart from Peter Brandt of The next significant support seems to be around the $375-$425 level, some 25% below current levels, by most estimates.

  • Earnings Misses: While profits and sales continue to move up, Apple earnings missed expectations in its latest report … even after lowered guidance. It used to be that analysts would call any miss “rare,” but the company fell short of sales and profits earlier in 2012 and also late in 2011. Looks like these quarterly misses are becoming more common.
  • No More “Mystique”: Charles Sizemore and I talked about this in a recent podcast after Apple earnings. The gist: Consumers might not be gaga over high-priced Apple gear anymore now that better-competing technologies exist, and investors are no longer convinced that Apple can do no wrong.
  • Macro Stuff: Oh yeah, and even if Apple wasn’t in trouble specifically, there’s a lot of big-picture stuff weighing on the market — from the recent attacks on Gaza to the eurozone falling back into recession to the threat of mounting layoffs at home in the U.S.


  • Long-Term Momentum: AAPL stock still is up about 30% year-to-date in 2012. That’s double the market, in case you forgot.
  • Fundamentals: Unlike many other tech companies experiencing trouble growing sales or profits — from PC stocks like dell Dell (NASDAQ:DELL) to mobile competitor Research In Motion (NASDAQ:RIMM) — Apple continues to see great growth. And most importantly, that growth is coming with bigger profits and hefty margins.
  • Dividend: Apple yields more than 2% at this valuation. That’s an OK dividend, but for those folks like me who bought awhile ago, your cost basis boosts that yield even higher. At $400 a share, for instance, your yield is almost 2.7% — the same as oil major Exxon Mobil (NYSE:XOM). Furthermore, Apple’s dividend payout ratio is in the single digits, so there’s ample room to increase that dividend in the near future and for years to come.
  • Valuation: Based on fiscal 2014 forecasts of $56 in earnings, the company has a single-digit price-to-earnings ratio. That’s at the low end of most S&P companies, the low end of the tech sector and the low end of Apple’s historic valuation levels.
  • Holiday Push: It still is worth noting that some of Apple’s recent troubles stem from supply issues, not demand issues. While that’s certainly not ideal, it’s a much easier problem to remedy. If Apple has ironed out the kinks (as many hope) in the intervening months since its earnings miss, the holiday season could be huge.

So that’s that. I am sticking it out with AAPL for the long-term capital gains, the dividend and because I am not a trader. However, if you are looking for a short-term swing trade, there probably are better places to put your money in the next few months than Apple stock.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he held a long position in Apple but none of the other stocks named here.

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