Posts Tagged ‘AAPL’

New stock pick: Long Apple (AAPL) & Short Blue Nile (NILE)

By: ispeculatornew | Date posted: 05.24.2010 (6:29 am)

With only 2 active trades right now (RIMM vs YHOO & PCLN vs TZOO), we are now ready to take on a new trade. There were many options available this week. I always feel like when markets go down so much, many of the securities in my dashboard become mispriced and so there were many other opportunities. I discussed a few of them in yesterday’s premium newsletter. Apple is not the easiest stock to trade because of all the hype surrounding the company. Having consumers that are passionate about its products is certainly good but of course it all comes down to sales and profits. My basic assumption going long Apple is that the company still has a lot of growth in it. Ipad’s are a hit by any possible measure as they are selling out quickly in the US and are now ready for a worldwide explosion as they become available in 9 more countries within a few days.

That means huge sales numbers of course but it also means more incentives for developers to create solid applications that will generate recurring revenues. In the same way, Apple’s Ipad is taking over the power spot that Amazon’s Kindle had been enjoying as the top EBook reader which will likely create a similar (although not quite as powerful) environment as Apple has been enjoying with music. Apple is facing competition but like its dominant Ipod line, the Ipad seems to be the overwhelming #1.

As for Blue Nile, the same reasons give me incentives to short the stock again and again with success. The past two times that we did the trade were against Netflix (NFLX). Both were successful but I really feel like Netflix’s stock is not as cheap this time around which is why I did the trade against Apple (AAPL). The mystery surrounding Blue Nile is its high P/E ratios. The stock has not been able to generate as much growth as analysts had been anticipating and frankly I do not see any change in that regard in sight. Just take a look at its traffic stats and you will see the challenge of selling luxury items in a weak economy. I can hear those saying that Apple’s items are also luxury items. True. But try telling any Ipod/Iphone user to switch to save a few dollars… good luck:)

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthBook ValueRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
MWWMonster Worldwide Inc4.88230.318.5-13.96-4.654.788.75-5.83N/A
AAPLApple Inc93.4210.69.8-5.0127.8623.1340.6225.5634.76

Mighty Apple (AAPL) generates billion dollar business in a few months…

By: ispeculatornew | Date posted: 05.04.2010 (3:32 am)

Looking at Apple, generating a new billion dollar business can almost look easy. We have barely started the month of May and Apple’s latest product, which was announced in late January, is already on pace to generate $1 billion in sales in this quarter. Simply amazing. Apple confirmed yesterday that it had just sold 1 million Ipad’s, far more than expected and now on pace to become a bigger business than the Ipod or the Iphone if that is even possible. The beauty of the product is that Apple has high margins on Ipad sales by all estimates, and has spent little money on marketing the product. It helps when media around the world is putting Steve Jobs and the Ipad on the cover of every newspaper and magazine. If we estimate an average of 600-650$ per sale for each Ipad (not including money made on related products, applications, books, etc), we can see that the Ipad already has 2/3 of the billion dollar in revenues in a matter of weeks.

Apple’s stock soars…

Of course, no one will be surprised to see the impressive growth of Apple’s stock in recent weeks. The Ipad has certainly been a major success and those critics who said that the Ipad was nothing more than a big Iphone are probably very sorry if they went short on Apple’s stock. Interesting stat about Apple. I read somewhere last week that someone that would have bought Apple stock for 400$ when the Ipod was first launched (instead of buying the iconic Ipod), would now have 15,000$ worth of Apple stock today. Is the same true of the Ipad?

Google’s stock is still depressed

Now compare all of this to Google. Google has been looking for a billion dollar business for almost a decade now. Search has been an incredible business but where will the growth come from now? We wrote a series of posts recently about Google’s next billion dollar business speculating that it might be as a financial data firm, providing financial research or even as a hedge fund. There are of course many different possibilities for the search giant but it’s safe to say that Google’s story has been much different in 2010 from Apple. No big success to date and a major problem with the Chinese government has certainly not helped the stock.

Having said that, I remain an optimist regarding Google and certainly a long time bull. But certainly at this point there’s no way to give Google the win over Apple.

New Stock Pick: Long Research in Motion(RIMM) / Short Yahoo(YHOO)

By: ispeculatornew | Date posted: 03.02.2010 (5:00 am)

To many, this might look like an odd pair to trade. And in many ways, I agree that it is. I was looking at my screen today trying to see the better opportunities and I thought the best opportunity right now is Research in Motion(RIMM). Yes, it continues to be under attach from both Apple(AAPL) and Google(GOOG) with Palm(PALM) slowly being taken out of the market. So the logical step was to pick RIMM against either AAPL or PALM. But I do already have a long position on AAPL (not that I would short Apple anyway… it would be almost as bad as shorting Baidu). Shorting Palm would be something to consider but at this point, Palm is down over 40% this year alone and everything seems to be going awfully wrong for the smartphone maker with its stock going dangerously approaching 5$.

Reaching that point is significant because many investors (institutional) do not have the authority to own low priced stocks (often defined as stocks below 5$) and so it could continue to fall for a while. So why not go short Palm? Because no matter what the company is, when its stock gets crushed so badly, at some point there will be a rebound. So I prefer going short a stock that should get crushed, instead of one that already did!

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNPriceline Group Inc/The1245.932.8919.437.1829.134.68137.971.26133.428.9537.44
PPandora Media Inc24.54N/A47.84-7.74132.524.092.511.823.54N/AN/A

All regular readers here will not be surprised to see me go short Yahoo(YHOO). Last year, I did two trades on the stock (going short both times), and both ended up doing well. Among the stocks I follow, Yahoo seems to be the most overvalued right now. It trades at a P/E of 39 which is crazy for a company that is regressing right now instead of improving – its sales have actually been declining. It does have some assets worth mention but those are few and far between.

You can also take a look at the following chart published by TechCrunch about Yahoo users.. nothing more to say, case closed!

Closing 2 trades and a look back on the two remaining live ones

By: ispeculatornew | Date posted: 02.18.2010 (5:00 am)

It is now time to close 2 trades, one that went badly and the other which went better than I could have hoped. I will start with the good one!

LONG NFLX/SHORT NILE

Blue Nile is a difficult stock to short because it is very volatile and trades at very high P/E’s compared to its peers (in my opinion). While I like the company and think it does have a very good future, its high ratios continue to shock me. I had gone short against Netflix, who announced very good earnings as well as a few more partnerships. This was the best example of a long/short trade that went for the best as Netflix gained 26.61% while Blue Nile lost 17.51% of its value for a total gain of 63.04%***

***As explained in the past, when you do long/short trades, you actually put up margin only, no capital and so returns are divided by .7 to account for the fact that 10,000$ portfolio would not have 10,000$ short and 10,000$ long but rather 14,000$ long and 14,000$ short.


LONG GOOG/SHORT BIDU

I knew that shorting Baidu was a risky proposition but simply believed it was also an overvalued stock at this point. I did turn out to be wrong. Google did remain steady (-2.19%) but Baidu gained (-15,82%) enough to make me a loser on this trade, a loss of 24.79%.


The other two trades that I currently have are both going fairly well so far:

LONG PCLN/SHORT EXPE +9,64%

LONG AAPL/SHORT AMZN +8,67%

So far this year, it gives me an average return per trade of 14.14%, well above expectations. Remember that I was quite happy last year with the 2,53% return I had given the short time the average trade lasts. I should have a new trade next Monday, hoping that they can continue to do well!