Apple (NASDAQ:AAPL) stock carries little intrinsic risk. If the markets are higher in the future, then owning AAPL stock makes sense for most. The intent of the investor makes all the difference as to when to buy it. In the very long run, it won’t matter much, but it is better to hit the ground running. It’s sub-optimal to buy a stock just before it corrects. With a little homework, trading a great stock like AAPL can be even better than blindly hitting the buy button.
Currently equity markets are on fire and they are setting records every week. This is in spite of some of the worst economic conditions in recent history. There are feasts and famines out there and it depends on the business you’re in.
Apple arguably has the best prospects of all companies. It is a giant boulder of success rolling ahead, and it will be hard to break its momentum.
Under the Tim Cook regime, Apple lacks the luster that Steve Jobs brought. However, this somewhat boring stint is seeing the company make the shift into service income not just hardware. Long are the days that analysts await every iPhone volume headline. But make no mistake about it, this is still an iPhone company.
Most of the services that now account for more than half the revenue won’t exist without an iPhone. The phones sales are even more important now to grow the ecosystem.
Own AAPL Stock Long Term and Trade it Short Term
From an investment perspective, owning AAPL stock amounts to a solid financial decision. The current valuation is bloated compared to its prior years, but so far experts have not cared. They are giving it a pass on that front because of the the new sales mix.
The ramp is steep — the trailing price-to-earnings ratio rose from 18 to 35 for example. Even now, Apple’s valuation is still in line with the rest of the giga-cap tech companies like Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). That alone is not a reason to short it.
If markets fall it too will fall, but I seriously doubt that it will correct all by itself. It comes down to timing and that differs depending on the intent of ownership. In the short term, the stock price range is tightening so a move should be coming soon.
The chart is showing a series of higher-lows and lower-highs coming into a point. There’s a short-term battle brewing in Apple. I pointed out three ways to trade it on a chart in early October, and two of them worked out.
The bulls will soon have opportunities, either chasing breakouts or buying dips. Conversely, the bears will have to break decisively below $110 per share to start any significant bearish patterns. In this bullish market, that will be very hard to do. AAPL stock has shown some relative weakness while the markets were strong of late. Nevertheless, those long the stock are confident in their ownership. Dips, should they come, are buying opportunities. The only way they are not is if sentiment on Wall Street flips.
Don’t Count on Politicians for Help
We are almost done with the U.S. elections, and the politicians can soon concentrate on reflating the economy. Investors have been waiting for a second round of stimulus, so therein lies some of the hopium on Wall Street.
Personally, I am not optimistic about that because if the politicians were serious about helping their constituents, they would have done it before they went on vacation in the fall.
Somehow, the economy is doing great considering the circumstances. The holiday season reports will come out much stronger than forecasts. Experts like Wedbush to name one are expecting strength from the holiday season. Reports on that will be bring a slew of positive headlines to take equities even higher — including AAPL stock. The balance of buyers and sellers tilts in the favor of the bulls. This means that it makes all the sense in the world to continue owning it at least for the next few months. Investors are not willing to leave the stock market. They sell A to buy B and that’s the “rotation” that’s all the rage these days.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.