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History says Apple past its peak

Lee Brodie

Of all the companies that report earnings, few results are more eagerly anticipated than Apple (AAPL). Historically the firm tends to harness expectations and then post numbers that are better than expected.

And although there’s no fundamental reason to believe the pattern is changing, developments earlier this year don’t bode well, at least by historical standards.

Apple was added to the Dow Jones Industrial Average (^DJI) on March 18th after the close. Becoming part of the blue chip index, which is made up of 30 companies, would seem like a reason to celebrate, however, if you’re a shareholder, history says otherwise.

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“Being added to the Dow is usually not a great sign for a company’s future prospects,” explained Chris Gessel executive editor of Investor’s Business Daily. “Usually by the time the folks that put the Dow together select a company, their best days are behind them.”

In turn, shares decline. “We’ve seen stocks peak a number of times as they go into the Dow,” Gessel added.

Of course, Apple could be the exception to this rule. Few companies have such fiercely loyal customers and the introduction of a new Apple gadget is typically met with great excitement with sales to match.

Nonetheless, Gessel wouldn’t be surprised to see Apple decline, at least in the near-term. “They’ve already had a huge run and it’s a massive company, so I think the law of large numbers could catch up with them.”

Looking at expectations, Gessel added that Wall Street is looking for 29% growth. “And most of that growth will be a factor of iPhone 6 sales. And Wall Street will be looking at profit margins and acceleration to see if the push remains strong.”

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