Apple ($AAPL) Getting Absolutely Killed..Now What?

By: ispeculatornew
Date posted: 12.17.2012 (4:00 am) | Write a Comment  (2 Comments)

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It’s no secret, I’ve been a huge believer in Apple, both the company and its stock. As you can imagine the stock getting crushed has not been good for me. Not only am I long the stock but it was also one of my 4 stock picks in the yearly stock picking competition. As you can imagine, my performance has declined. Just take a look at this chart:

Brutal, brutal, brutal….

Let’s Not Lose The Context

It becomes so easy with the information overload to think that Apple is in big trouble, crashing quickly, etc. Let’s look at a longer term chart

Suddenly, it doesn’t look as bad does it? Just last week, Apple declined after UBS downgraded Apple, changing its price target to $700 (from $780). More is expected today after a downgrade by Citi during the weekend. That’s still pretty darn high isn’t it? It would be a return of over 25% in the next year.

Is Apple Still A Bargain?

Let’s take a look at some numbers:

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So basically, Apple is trading at a P/E of 10.7, forward P/E of 9.1, has returned 32% this year… sales are growing at nearly 50%.. it doesn’t seem as dramatic right? So why is everyone selling? Fears that the iPhone5 and iPad minis are not selling as well as they had hoped seem overblown, Honestly, Apple still has dominant products, has an Apple TV in the pipeline, continues to dominate in the sales of digital products such as music and apps.

To give you an idea, that is almost exactly Microsoft’s (MSFT) P/E ratio..except that Microsoft is growing 8 to 9 times more slowly…

So really, I continue to believe in Apple’s growth story, and its in stock.. how about you?

Disclaimer: Long Apple (AAPL)

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2 Comments

  1. Comment by Robert Zaleski — December 17, 2012 @ 11:47 am

    Hey,

    I’ve thought this numerous times, but I’m finally going to be bold enough to ask it. What’s the most a trade has gone against you and still succeeded? I ask this because it seems to me you should be cutting trades that are losers if they are at 5-10% down.

    And when a trade is going well, I don’t think you should necessarily liquidate at 20%. Maybe you do once it hits 15+% or some other number. Or maybe you reset your 5-10% drawdown target.

    Just curious how you came up with a 20/20 target.

  2. Comment by IS — January 7, 2013 @ 8:40 pm

    @Robert – Thanks a lot for the feedback, I appreciate it. I have gotten this question a decent bit and spent a good amount of time reflecting, I will be changing my rules for winning trades this year and posting about it in my post tomorrow, my first 2013 long and short trade. Thanks again

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