Introductory Remarks by PT
Below we present a recent article by the Mole discussing a number of technical statistics on the behavior of AAPL over time. Since the company has the largest market cap in the US stock market (~ USD 850 billion – a valuation that exceeds that of entire industries), it is the biggest component of capitalization-weighted big cap indexes and the ETFs based on them. It is also a component of the price-weighted DJIA. It is fair to say that the performance of AAPL is not unimportant for the broad market.
AAPL, weekly over the past 5 years. The stock has recently hit new highs. In a way this is quite funny, as it happens just as the company enters maturity; its revenue and earnings growth rates are fated to enter a long term phase of decline from here on out no matter what – this is a mathematical certainty. Many of the darlings of the late 1990s tech bubble eventually faced a similar problem (in early 2000 we patiently explained to a fellow investor why Cisco could not possibly maintain an annual revenue growth rate of 50% for another decade, or even for another few years). This is beside the fact that the company hasn’t introduced any particularly successful innovative products since the iPhone, which remains its biggest revenue generator by far (the times when new generations of the iPhone offered genuine advances in terms of design and technological capability are but a distant memory as well; these days updated versions at best tend to offer a handful of tweaks). We don’t want to detract from the company’s undeniable entrepreneurial success and well-deserved reputation for quality, reliability and cool design. We merely question its current stock market valuation and the sense of timing of those buying the stock here and now. Admittedly, given the market’s effortless climb up the rungs of the greater fools ladder hitherto, recent buyers may well make a profit. We only know that someone will eventually end up holding the proverbial bag. A side note: the blue dotted lines on the chart serve to highlight a typical momentum divergence between RSI and price. The divergence is even more glaring on a daily chart. Sometimes such divergences turn out not to mean anything, but more often than not they are a short term warning sign worth heeding – click to enlarge.
We are not surprised that the long term statistics on AAPL reveal that its performance in September is on average the by far weakest of the entire year. This is in line with the stock market’s overall seasonal patterns (see “The Dangerous Season Begins Now” by Dimitri Speck for the details). It is important to keep in mind that these average data do not mean the stock will always perform badly in September. That is certainly not the case – but the probability that it will perform badly (and the broad market along with it) is fairly high.
Given the current fundamental …read more
Source:: Acting Man
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