Thing continue to be fairly volatile here with my tech stock picks. Overall, it’s been a great year so far with an annualized return of over 50%. That being said, there have been a few bad trades and the one that comes to mind is the failed trade on long $AAPL and short $AOL. That trade set me back big time when AOL announced it had decided to sell off most of its patents to Microsoft (MSFT) sending its stock off to the clouds. Those who were short such as myself got killed. Thankfully, I never put enough in one single trade to become too vulnerable to such events. It was still a tough day but last week’s long trade on Travelzoo (TZOO) made up for most of it, thankfully:)
So today I am back, trying the same trade, hoping that this time the fundamentals will prevail instead of one time M&A activity:) Let’s start off by looking at the numbers:)
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Beta
AAPL Apple Inc 605.23 28.05 17.74 12.31 53.77 65.96 4.68 96.6 1.06
AOL AOL Inc 25.79 0.13 116.36 30.37 69.54 (8.88) 3.43 23.04 1.11
Long Apple (AAPL)
No surprise to see me get right back on the $AAPL bandwagon, I’ve been very clear how much I believe in the stock. Of course, the fact that Apple has gained so much already this year does mean that there is less potential. I do however still think the stock has a lot of upside with little to no downside. That makes it an easy stock to own. I’ve seen some interesting stats regarding Apple’s valuation including the fact that Apple is now worth more than the combined values of the stock markets of Spain, Portugal and Greece. Scary? Not at all. Apple is huge, is worth a lot, but the fundamentals are there, which is the only main and only critical point here.
Short AOL (AOL)
Well, few would have predicted that AOL would end up being one of the top performing stocks so far this year. In fact, it is the top pick among the 32 I ranked in my 2012 Tech Stock Power Rankings. I’ve gotten a lot right in those rankings but $AOL surging was a huge miss. I don’t honestly think I could have gotten that one right though. Going forward, I do expect that AOL will have a lot of trouble keeping up a strong performance as its existing assets have not been performing as much as you’d expect, quite simply.
Disclosure: No positions on Apple (AAPL) or AOL (AOL), this trade will be opened on Monday morning