RSS

Advertisement

Beware Of Those Poison Apples!

  • Written by Syndicated Publisher No Comments Comments
    November 6, 2012

    In the post ‘After My Contrarian Calling Apple’s 3rd Miss Accurately, I Release My Apple Research Track Record For 2 1/2 Years’, I came clean with the historical performance of my Apple research. Of course, many a hater had their hearts crushed as math and common sense once again ruled the day. Still, we see herd mentality and brand loyalty effect even those who’re really supposed to know what they’re doing – to wit: Rochdale Trader Made Unauthorized Purchases Of As Much As $1 Billion In Apple Stock Last Month

    … a trader at Rochdale Securities made unauthorized purchases of $750 million to $1 billion in Apple stock last month and now the firm is seeking a lifeline. 

    It’s unclear when the unauthorized stock purchases took place, but shares of Apple have dropped around 11.5% since Oct. 1.

    Stamford, Connecticut-based Rochdale, which employs noted bank analyst Dick Bove, is looking for a possible deal to recapitalize such as a capital injection or a merger, Bloomberg reports citing sources familiar.

    Well, it’s obvious the brokerage didn’t buy that trader a subscription to BoomBustBlog. I’ve been following Apple for roughly two years now and have been one of the (if not the) most accurate fundamental pundits on said matter, with my valuations hugging Apple’s share price rather tightly for the entire time I have followed it.

    aapl research accuracy copy

    Reference Apple – Competition and Cost Structure 05/16/2011, which is now available for download to all due to its dated nature – even those who do not subscribe. Please note that this report only includes base case scenarios, while the latter reports included base, optimistic and pessimistic scenarios – which is much more realistic. Although some of the later reports are also stale-dated, they contain valuable knowledge that I’m not prepared to release to the public for free at this time.

    On Friday, 12 October 2012 I posted A Review Of The Accuracy Of Last Quarter’s Apple Earnings Notes where in I went over the true value of my last quarterly review of Apple’s performance. Please note that this was before the Q3 earnings release:

    A subscriber convinced me to post the 1st quarter’s valuation bands (subscribers, see Apple Margin & Valuation Note 03/15/2012) for Apple to squelch the comments of those who are guessing what’s behind the firewall. Our base case scenario was right on target, and  during the target and after the earnings release I realized that we underestimated international (especially Asian) sell though and shifted the weight towards the optimistic band which also proved fairly accurate. As all can notice, the pessimistic band is not shown, and that is where the value lies here. I am now shifting my bias towards (that’s towards, not to) the pessimistic band, for I feel Apple has now started to feel the competitive and margin pressures that I warned of, and has done so right at the deadline that I gave in 2010 (this is just as much a factor of luck as it is skill, alas, if it bears fruit it bears fruit). The latest valuation bands can be accessed by paying subscribers below (click here to subscribe):

    Apple 4Q2012 update professional & institutional
    Apple 4Q2012 update – retail
    “iPhone Margin worksheet – blog download

    Just to make this perfectly clear, I’ve been stating that Apple had margin compression stemming from extreme competition coming for two years now. That does not mean that Apple will collapse. As a matter of fact, I’ve included my stale Apple reports and a graph that shows I’ve pretty much been on target with Apple’s share price the whole while. And for those who are so concerned with timing, I’ve highlighted in bold font where I’ve told subscribers to turn pessimistic on Apple’s share price. This was October, roughly 12% ago in share price and many tens of billions of dollars in market value.

    image005

    Keep the following in mind as you peruse this post…

    apple product chart growth

    I discussed this in detail with Lauren Lyster on Capital Account. The margin discussion started at 7:55.

    For those who haven’t heard my description of Apple’s arch competitor, Google’s, business model, look here:

    See Right On Time, My Prediction Of Apple Margin Compression 8 Quarters From My CNBC Warning Landed Right On The Money! for more on the mechanics of the margin compression theory for Apple.

    The latest Apple valuation bands (including the advanced pessimistic bands) can be accessed by paying subscribers below (click here to subscribe):

    Images: Flickr (licence/attribution)

    About The Author

    Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts to uncover truths, seldom if, ever published in the mainstream media or Wall Street analysts reports. Since the inception of his BoomBustBlog, he has established an outstanding track record

Advertisement