New Trade: Long Apple ($AAPL) & Short AOL Inc. ($AOL)

By: ispeculatornew
Date posted: 01.05.2015 (3:00 am) | Write a Comment  (0 Comments)

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Very exciting to be back with my long & short stock picks as I have not made such a pick since August!! Last year was phenomenal in terms of results (over 40%) and there is certainly a lot of pressure. A reader asked me if given the results I was going to increase the amount of money into these trades. The answer is yes but only very slightly. I currently have 10-15% of my portfolio in these picks and know too well that these picks can be extremely volatile. I`d be more than happy with a 10% return,especially given how little correlation this portfolio has with the overall portfolio. In the end though, the vast majority of my investments are in more plain vanilla ETF & passive income investments with the next big part in my longer term speculative picks and I don’t see that changing in the near future. Any thoughts?

You can also see my long & short trades here:

http://www.intelligentspeculator.net/livetrades

Today,  I’m opening my first long & short trade of the year, hoping it’ll be a good one. Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg GrowthSales 5Y Avg GrowthEPS 5Y Avg Growth
AAPLApple Inc109.3317.1612.896.954.2719.020.7930.0429.8931.32N/AN/A
AOLAOL Inc45.4930.4619.475.854.0929.761.229.9-2.93N/A4.8633.55

$AAPLLong Apple (AAPL)

I know, I know. Many of you had guessed that my first pick of the year would be Apple. I wish I could be more “original” but even after all this time, I continue to think that Apple is an incredible play in terms of upside potential vs. downside risk. At its current valuation, Apple is by far the cheapest stock on my radar in terms of forward P/E despite generating a lot of top and bottom line growth. A lot of this is driven by major doubts regarding Apple’s ability to keep up the growth. I get it to some extent but I think that fear is overblown. There are so many different reasons to be optimistic about Apple and I’ll certainly write a more in-depth article with those thoughts later this month but the executive summary  is that there is still a lot of growth left for Apple.

ycharts_chart

Next earnings release: January 27th 2015

$AOLShort AOL Inc. (AOL)

Ah I was about to write about having a love/hate relationship with AOL but the reality is that there’s been very little good about it. AOL is one of the stocks that I’ve had the most trouble getting right. It has had very little going for it in terms of products, but has continued to deliver great performance for shareholders thanks to one-off sales of patents and other items but also continued M&A speculation. I simply can’t see that keeping up in 2015. Yes, Adap.TV, AOL’s video advertising play has been delivering growth but that is hardly enough to justify its current valuation in my opinion, especially when I compare it with a name like Apple.

ycharts_chart (1)

 

Next earnings release: February 6th 2015

Disclaimer: Long Apple (AAPL)

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