On January 26, Henry Blodget came on with Yahoo Finance and made what some would call a stunning declaration: He was going to sell his Apple shares, he was just trying to decide the right timing.
(Exact words: “I think I probably will sell. I don’t know if it will be before the quarter or after the quarter. I’ve had it for a couple years now. It’s been a wonderful run. I just worry we go into a period in which it moves sideways for a while.”)
The next day, Apple (AAPL) reported the most profitable quarter in corporate history. Blodget, it turns out, decided not to sell: “I looked at it 5 minutes before the call, I looked at the valuation, I thought about, ‘OK what’s going to happen next quarter? What else are they gonna launch?’ I said ‘Agh!’ and I kept it."
A common mistake from investors is to buy shares in a promising company and then not think about the best time for an exit.
“I think if you step back from Apple from the last few years… they missed a step with the iPhone. They had a smaller iPhone that opened the door for Samsung for 2 years, remember Apple stock got cut in half, everyone left them for dead,” said Blodget. That’s when he bought said shares.
“We’re now in what I think will be two quarters of massive performance. We already had the first one. We’re in the middle of the second one. After that, I do think people will wonder what’s coming next. Is the iPhone 6s going to be enough? Is the 7 going to be enough to drive this big upgrade cycle? I doubt it, but they do have the watch coming,” he said.
Blodget, though, still isn’t convinced the watch will be a huge money maker for Apple. While it may be that he’s just not a watch guy, he also worries that the watch needs to work in conjunction with a phone, meaning it doesn’t replace anything and just adds to the devices and weight people will be carrying around.
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Remember, Blodget isn’t the only one trying to call a top on Apple and get out. Billionaire Ray Dalio learned this the hard way. A regulatory filing last week showed his Bridgewater Capital – which is the world’s largest hedge fund - cut its stake at the end of last year. Bridgewater still owns some $33 million worth of Apple at current valuations, but also picked up shares of competing tech companies like Microsoft (MSFT).
But before you go too hard on Dalio, this type of skepticism isn’t new when it comes to Apple. Remember the doubters before the iPhone 6 unveil? Everyone said that Samsung already had a bigscreen phone and Apple was late to the party. Then Apple sold 74.5 million phones, surpassing even its own goals.
At the end of 2014 when Apple was named the most-searched stock of the year by Yahoo, Senior Columnist Michael Santoli summed the Apple dilemma up perfectly: “It always seems to run hot and cold. They have this great winning streak and then people start to question what’s next? That’s going to be the 2015 question for Apple.”
The bottom line for most Apple investors is either the product pipeline or their faith in the company. So in the near term that means the Apple watch and Tim Cook.
“This is just, it is a great company,” said Blodget. “It continues to inspire, the products are beautiful, they function incredibly… going back to the fact that they gave Apple store employees a raise, they’re paying them more than they have to, this is something that we just need to do more of in this country, so there’s so many things to admire about them.”
That said, it may not be the best time to buy into Apple. Blodget is a big believer in Index Funds and reminds viewers that they are a solid way to invest in Apple as well. Apple is a large part of most Index funds. Not only that, the S&P 500 is a weighted index, so the better Apple does, the more it impacts the index overall.
So the next question for everyone is: Will Apple’s market cap hit a trillion? And if so… when? Let us know what you think in the comments below.
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