As Apple (AAPL) pulls into another earnings report after the bell Wednesday, we thought we would update our momentum comparative that has painted the inflections and trajectory on the tech behemoth quite closely over the past 16 months.
While Apple's performance this year has not surprisingly consolidated the strong upside reversal witnessed in 2013, the momentum going into earnings is still presenting an upside bias for the stock.
As one of the only individual equity names that we cover closely and carry, we continue to like the position. With a return of almost 40% over the past year, the value potential in Apple has both outperformed the broader indexes (SPX~20% & Nasdaq~29%) and its closest tech contemporaries - even Google (~35%) and Amazon (~27%).
Considering our expectations that risk aversion and volatility are poised to rise in the equity markets through the balance of the year, we appreciate Apple's 20 month rolling correlation of only +.13 with the Nasdaq and +0.03 with the SPX.
Comparing Apple to Oil
In the charts above, we compare the trend of Apple starting in December 2012 with the oil market in 2008 because the quality of the underlying market psychology that drove both of these dominant trends was very similar - which manifested in congruent momentum and price structures.
Apple diverged from an exuberant growth path directly after its visionary and genius marketeer passed away on October 5th, 2011. Over the next year, the stock, which just happened to be the largest public market cap company in the world as well as the most widely held security by hedge funds, doubled from the intraday low on Jobs' death. Did it make much sense based on the fundamentals of Apple's known and extrapolated market share or the underlying governing future of the company at the time?
Certainly not - but momentum served as a formidable tailwind.
A similar market psychology and trend dynamic occurred for the oil comparative we have previously referenced. Back in late 2007 as the equity markets were starting to cough out and the first signs of an economic downturn were becoming readily apparent, oil, the literal fuel for the economy, started its parabolic ascent. In hindsight, it was anything but rational and largely a herded stampede - spearheaded by hedge funds both large and small that were bidding the commodity markets to icarus heights and the US dollar to its secular low.
So it comes as no surprise, that the most recent signatures of one of the last large crowded canyons are leaving similar momentum footprints on both the front and backside of the parabolic face. While we have adjusted with the nuances of the comparison along the way, overall, it has been a remarkably profitable guide for remaining on the right side of a powerful performance trend over the past year.
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