Apple closed on Friday at $576.80.
This was the lowest closing price for the shares since July 27, 2012 and the shares ended the day and the trading week off more than 18% from the all-time high of $705.07 set on September 21, 2012.
IMO for long-term investors, Friday's closing price represents an excellent entry opportunity.
Apple has come off its highs by $100 per share and is now testing its 200-day moving average near $600 per share.
I do worry that a company with a market cap that size and being such a large percentage of the S&P 500 could suffer from the "law of large numbers" rule, but from our view the slower growth is already discounted in the stock price.
A good apple farmer will know when his apples are ripe. Contrary to popular belief, whether or not an apple is ripe has little to do with size or color. An apple farmer knows when his apples are ripe because he tracks the number of days since the trees flowered.
Yes, it is a cheesy analogy, but a good investor should also know when a stock is ripe for the picking. Stocks, like apples, mature (or ripen) over time.
Long story short, Apple is set to blow away earnings expectations for the last three months of the year. The iPhone 5, the iPad with Retina Display, and the iPad mini are likely to be hot gift items this year, and they will drive higher earnings. While the iPad mini I'm sure will cannibalize some iPad sales, this will also likely steal some sales from the Nexus and Kindle Fire lineups as well. Investors looking for a short-term play on Apple might consider buying today, and riding the wave to an earnings beat for the quarter. For longer-term investors, Apple keeps updating and introducing new products, and next quarter should calm fears that the company is done growing
One of the key reasons the market sold off was investors' doubts about whether the two sides can reach an agreement to avoid the "Fiscal Cliff." Both parties are saying the right words. Speaker of the House Boehner announced yesterday that Republicans would consider additional tax revenue under the "right conditions." He had to read directly from the teleprompter in order to keep from veering off message. The president has always spoke eloquently about the need for bipartisanship and "working together" but has rarely, if ever, has shown the leadership and effort to make this happen. Let's hope this time his actions match the rhetoric.
The second reason the market sold off is that it really needs to in order to get over the looming fiscal cliff. Both sides need the cover of a plunging market in order to be able to come to the concessions needed and that will be unpopular to their bases. Much like the market had to plunge some 700 points on the Dow after Congress first rejected TARP before it could muster enough political will to get the bill over the finish line on the second try. Look for the market to continue to be volatile until the politicians do what needs to be done.
Apple analogy Los Angeles Lakers:
As much as I like to believe that stocks are driven by fundamentals, I realize that is not always the case. Actually the more I invest, the more I think equities behave like sports teams. They can have all the right pieces, but unless they have momentum ("The Big Mo") and chemistry, they continue to lose games they have no business losing. One doesn't have to look much farther that the current Los Angeles Lakers to confirm this thesis. Despite having three certain hall of famers (Bryant, Nash, Howard) and a possible fourth (Gasol), the team has struggled early in the season losing all 8 preseason games and is also off to a slow start in the regular season. I have every confidence that by the end of the season, the team will be a force to be reckoned with in the playoffs, but they may be painful to watch until after the All Star break as they work out the kinks.
Technical analyst Ralph Acampora is hoping for the worst. “Ideally, I’d like to see the market open down big,” he said in a telephone interview late Tuesday. “A bang, down 4% to 5%,” that rockets the CBOE Volatility Index VIX -1.71% up to around 25, “would scare the hell out of everybody.
"It's not easy to make the iPhones. We are falling short of meeting the huge demand," says Foxconn chairman Terry Gou, suggesting iPhone 5 shortages aren't letting up. Another Foxconn exec made similar remarks last month. Analysts have reported Foxconn has enlisted a division that typically makes non-Apple products to help address the shortfall.