No, no, this is not a repeat post, I’m actually opening up the same trade that I traded on January 6th only to close it a week later or so. I always try to find good trade opportunities and while it would be nice to always come up with new trading ideas, I’ve got to be honest, my main priority is to make money, not be “original” in trying to do so.
Another good question would be why I closed out this trade if I was going to open up the same one a few days later. That is certainly a fair question. Recently, I started writing for the tech stocks newsletter about why I use stop losses and stop gains. It’s a critical part of what I do in my opinion. You could certainly argue, as one reader did by email last week, that my stops are too aggressive and that I should let trades go a bit further. That is something I’ve been thinking about for some time now and I finally decided to not include it in my 2012 trading changes. It might change during the year but so far, the current recipe has worked awfully well for me to contemplate this change.
2012 is off to a great start for my trading as I am now up on all 3 trades including 2 that were closed very quickly. That is certainly not typical and with earnings season starting soon (Google is one big name reporting next week), volatility will certainly spike up. That is one reason why you should not expect me to trade on Google (GOOG) this week.
Back to our trade, here are the relevant numbers for both companies:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Beta
AAPL Apple Inc 419.81 28.05 15.16 10.72 3.59 65.96 4.71 82.45 1.07
NILE Blue Nile Inc 36.57 0.98 40.48 29.99 -11.86 10.18 2.67 1.81 1.34
Long Apple (AAPL)
Apple has increased a bit this year (a bit over 3%) but that is far from enough for me to back off my statement that Apple is clearly the #1 tech company in terms of value vs price. The downside is very limited in my opinion given its valuations but the upside isn’t. There are now clear rumors that the production of the iPad3 is under way and that will give yet another boost to 2012 sales and profits. I’m also hoping for more news about the iPhone5 and the eventual release of the Apple TV to keep the momentum strong. I’ve written a few posts about Apple lately so I’ll link to those if you are curious about my thoughts about the company.
Short Blue Nile (NILE)
I do hesitate to some degree about shorting NILE at this price because the stock is already down considerably this year (almost 12%).. That could certainly bring a rebound, it would be far from shocking. However, if I forget that for a second and simply look at valuations, the stock remains very expensive and I don’t see anything to justify the valuation so in the medium term, I do expect more downside. Of course, NILE’s Q4 earnings to be released in Mid-February will be big because that would be the company’s biggest sales period by far. It should be interesting…
Disclosure: Will go Long Apple (AAPL) and Short Blue Nile (NILE) on Monday’s opening