Breakout

Apple Shares Back Below $600: Is a Larger Sell-Off Looming?

Breakout

There's an old saying amongst Bible Belt evangelists that goes, "You gotta get 'em in the tent before you start preaching to 'em." Along those lines, Paul Schatz, president of Heritage Capital, offered some inspiring but cautionary words for the Apple (AAPL) faithful.

The past week has seen the largest stock in the world face its toughest 5-day slump in 6 months. The way forward for Apple is still fraught with nerves, as some worry that all those gains could fast become profits, should investors finally decide to realize them and exit this crowded trade.

"The fundamentals of Apple couldn't be better," Schatz says in the attached video. "Apple could go to $700, $800, $1,000 first. I'm not that ridiculous in my notion to think that Apple is going to top right here."

Yet, in the next breath, Schatz paints a treacherous picture of what a post-top exodus might look like, saying, "Whenever that bull market peaks, I think Apple is headed, minimally, 30% down, probably 50% to 60% down."

It's all part of what happens when opinion changes on the ''lone stock standing.'' Until now, virtually every fund manager in the world, depending on their style, needed to have anywhere from 5% to 25% of their assets in this one stock just to tread water. Because of the breadth of ownership (71% by institutions), plus Apple's red-hot performance and outlook, it has essentially been on the do-not-sell list whenever we hit a bit of turbulence.

But Schatz says that is always how it has been with widely-held mega-caps like IBM, GE, or Exxon.

"This is the dot-com bubble all over again. I'm sorry, I am not saying it will never recover, but when you have the whole nation in one story stock, it never never never ends well," he says, pointing to a dearth of evidence for similar soft landings.

In the meantime, his advice is to own it but keep raising your stop-loss orders, or even start lightening up a bit, because when "go-time" inevitably arrives, it's not going to be pretty.

Please answer our poll question below: Which do you consider the most valuable today: One share of Apple, one share of Google, or $600 in cash?

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