Is Tim Cook responsible for your Xanax prescription? How many bottles of Extra Strength Tums did you go through this month? Did you know Drugstore.com has a special on the jumbo-sized Alka-Seltzer Original, only $10.99!
Trading can be an emotional roller coaster, but trading or investing Apple stock goes beyond emotional and enters into the realm of psychotic. Even people not in the market are getting concerned over the loss of shareholder value, and the volatility in Apple’s price. Have you ever thought about the spill-off effect Apple’s decline has had on semiconductors stocks? Some companies are at the brink of closing their doors.
Fortunately the selling appears to have subsided, and Apple may have found a bottom at $390, currently it’s trading about $20 above that low. The day after Apple’s earnings call, Apple shares revisited that low, but only briefly, it then rebounded to where it is now.
This kind of volatility drives traders and investors mad trying to guess which way the stock will go next. Should they wait, add more, protect gains, get in, get out? There are countless perma-bulls retail traders (little guys) that have been dumbfounded, many bailed when it got below $400 because they couldn’t take it any longer. Now, they’re kicking themselves as Apple surges up.
Tim Cook, CEO Apple
But it’s not Tim Cook’s fault. It was really the result of index fund being overloaded with Apple shares, and they rode it all the way to the top, making huge profits. Then some of the bigger funds, along with a swath of insiders, decided to take profits, which is natural, but it manifested into a slippery slope, which caused a cascade of funds to divest, and they kept on divesting.
This was exasperated by a confluence of things that mainly resulted in confusion and fear. Analysts smelled the fear, and so they jumped into action and used their superior intellect to explain to investors what was happening. And because they are analysts, hapless, glorified reporters, they mostly got it wrong, which did nothing but add to the fear, uncertainty and doubt (FUD). At the same time, also sensing an opportunity; Samsung jumped into action with a massive Apple smear campaign, which helped them sell a lot of cheap Galaxy phones and phablets.
Uncertainty is the principle reason people develop fears, and there was no shortage of uncertainty in this saga. Apple itself contributed to it, by just being Apple. That is, their practice of keeping mum about future products, particularly when they are about to enter or create a new market. Apple created this communications vacuum and the unfortunate effect was sleaze balls like Samsung getting sucked in through reverse osmosis.
Ken Segall, Creative Master and Author of Insanely Simple
In this new environment, which is largely “perceived and only tangential to the truth,” as Ken Segall put it in a talk I had with him the other day, Apple was forced to tip their hand in the absence of new products. So, they decided a stock buyback program and dividend boost was the best solution. Now, I can’t argue against this move, because it solves a lot of problems from an investors point of view.
It increases the value of Apple stock, which creates demand. It positions Apple as a more mature, value oriented company that will entice index funds to reinvest. It rewards faithful long-term investors, and a whole new group of value-oriented investors. It quells many of the analysts with their incessant nagging that Apple is hoarding cash, and generally creates a lot of good will.
Well, with this scenario, and with the things Tim cook said, eluding to big things to come, I couldn’t think of a better time to jump in to Apple. It’s cheap, and still the best run company in the world, with the most desirable products, and a whole lot more to come. Once the vacuum is filled with new products and a reinvigorated ad campaign, Samsung will whither away, and analysts will be able to say I told you so, and investors will be able to chuck the ant-acid.
Post a comment below…
