New Stock Pick: Long Apple (AAPL) & Short Blue Nile (NILE)

By: ispeculatornew
Date posted: 02.21.2012 (5:00 am) | Write a Comment  (2 Comments)

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Well after an amazing start to 2012 in terms of stock picks, the last couple of weeks have been much more rocky and in fact my average stock pick is now barely break even which is a disappointment of course. I am not worried too much about it because this a long term strategy (even though picks are fairly short term ones). After closing out 2 picks last week, I am back in today with a very familiar pick.

In fact, it is the 3rd time this year that I go long Apple (AAPL) against Blue Nile (NILE) always based on valuations. Let’s start off by looking at the numbers for this trade:

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Long Apple (AAPL)

I have been extremely bullish on Apple for some time now, wrote about it on this blog, wrote a much more detailed analysis in the free technology stocks newsletter and as one reader pointed out, I’m not even considering all of the government and business activity that used to go to Research in Motion (RIMM) among others and is quickly moving towards Apple. Just last week, I read about dozens of schools that are now making the iPad mandatory for students. This will quickly result in big profits. So yes, Apple is crazy cheap and it’s no surprise that I’m getting right back on the bandwagon.

Short Blue Nile (NILE)

You might think that I would be done trading Blue Nile. Why? As much as I’ve had some bad calls this year (shorting RAX on earnings day was the worst), being short Blue Nile has consistently paid off, both this year and in the past. The company did report earnings last week which helped to stock decline much further even. How could it have not? How could NILE possibly live up to its sky high valuation? The fact is though that the stock recovered some. And clearly some think it is undervalued. NILE’s management announced a stock buyback program. Those always leave me confused. Is the company buying because it thinks the stock is really cheap or because it wants investors to think just that? Hard to say, but I am once again more than happy to hear out any believers in this stock. Until someone convinces me otherwise, I’m more than happy to short NILE once more:)

Disclosure: No positions on Apple (AAPL) or Blue Nile (NILE) but this trade will be opened on Tuesday morning

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2 Comments

  1. Comment by mani — February 21, 2012 @ 4:21 pm

    Nice call. This trade is up 5% already !!!

  2. Comment by IS — February 22, 2012 @ 12:05 am

    @Mani – Thanks, hopefully it keeps up:)

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