There are some people that just love to take in wounded birds and believe that somehow that can nurse the poor wounded creature back to health. For some sainted few that is their “raison d’etre.”
I bought shares of Apple (AAPL) this morning after it was wounded by downgrades from Bank of America (BAC), UBS (UBS), Piper Jaffray (PJC) and Credit Suisse (CS).
You’re welcome, but I’m not saint. I certainly can’t be categorized as an “Apple lover.” Neither the products nor the shares have had consistent appeal for me, but the subjectivity is out of place when it comes to capitalizing on opportunity.
Clearly, this opportunity stems from the high profile downgrades. Such downgrades confirm for me that there is greater value placed on not missing out on potential gains than there is in protecting portfolios from disappointments.
Recent history has not given strong indication that Apple shares will rally after product launch events, particularly as the quality of the leaks regarding the “news” seem to get better and better. There are few, if any, upside moving surprises. In fact, one wouldn’t be terribly far off base to suggest that the sum total of predictions of what will be announced easily exceed the capability of squeezing all of the new options into a single device. As a result there is always bound to be someone leaving the party disappointed.
For those further expecting the announcement of new relationships, such as in China, there has to be some thought that the downside to disappointment may likely exceed the upside of what may already be partially built into the price.
Yet, protecting a client’s assets takes a back seat.
My basic understanding of math tells me that it’s more difficult to recover from a $5 loss than it is to find an opportunity to make $5 in place of the opportunity you missed.
But with a short-sighted view of what the future holds, analysts have created opportunity, just perhaps not for their clients.
I almost never buy shares without concomitant sale of option contracts, but in this case I listened to my own advice from just a few weeks ago when Carl Icahn entered into the picture.
In addition to now having a more favorable entry point to re-establish a position that was recently assigned, so too does Apple find itself in a better position to further implement its buy-back program. There’s no shortage of money still unspent in that program and there may be more added to the bucket.
No doubt this will be a topic of Icahn and Tim Cook’s upcoming dinner, which Icahn confirmed a few days ago would be this month.
But now that the product offerings are well known, they have no doubt been dissected by many who can extol or pan the virtues and relative value of the innovations. To attempt to analyze the advances incorporated into the iPhone 5c and 5s is somewhat meaningless with regard to short term investing, which is all I hope to ever do.
What I hope to do is turn shares into short term realized profit vehicles. For that reason I don’t dwell on the possibility that the fingerprint reader may be an entry way into mobile secure commerce solutions.
What I dwell on is how likely is Apple to withstand this onslaught and then I’m likely to sell call options into price strength, as I expect a bounce in shares, particularly as Syria is temporarily off the table.
Apple will continue being an incredible cash machine with these new devices. Argue about their price points as much as you want, argue about cannibalization, too. The reality will be that the phones will fly off the shelves and tie up the consumer base for another year or two. After all, it’s not just about selling product, it’s also about making certain that your consumer base is effectively barred from going to the competition without the burden of additional cost.
I’m still a product holdout, but the rest of my family isn’t, some of whom only joined the parade this week.
Scoff at the superficial changes, but Apple knows better than most others that bold colors will not only drive new sales. but will instantly help distinguish itself in the hands of one adolescent as another is watching.
While everyone enjoys talking about “the big picture,” today’s downgrades and market reaction have been anything but mindful of that more encompassing view.
This is what opportunities are made of, despite the fact that risk shares the same parent. Having been very critical of Apple over the past 15 months, and questioning why people had not taken profits befor
e they evaporated, I’ve nonetheless found a number of opportunities over that time to re-establish short term positions. In the past the drivers of those decisions were predominantly based upon option premiums and dividends. This time, however, the catalyst is share appreciation as the market will realize that its immediate reaction was unwarranted.