Wednesday, March 23, 2011

Buy Apple?

I suggested getting ready to sell Apple stock here (at $356.79) and here (at $360.80), and finally said "it's time to sell!" here (at $360.07).

And....the stock quickly dropped to the $330s. I wish I could take smart aleck credit for uncanny foresight, but I didn't foresee the Japanese earthquake, which left Apple hard-pressed to find new suppliers for components they'd previously bought from Japan. That's why it dropped.

But it dropped too far. Apple probably deserves to be back in the $350s (though not much higher, for reasons explained in those previous entries). Here's why:

1. Bad news always drops Apple's stock price more than it deserves, because investors are extra skittish about overbought stocks.

2. I think Japan will recover faster than we expect - though things may get worse before they get better. Who, for example, foresaw the speedy rebuild of Nagasaki and Hiroshima? When it comes to snap-backishness, it's hard to beat Japan (did you know that one month after the nuclear bombing, the area around Hiroshima was hit by a typhoon that killed 3000 and destroyed half the remaining bridges and ruined most roads and rail lines? And they still snapped back much faster than we took care of post-Katrina, a far smaller disaster?)

3. I expect Apple to be resourceful about re-sourcing the Japanese components. More so than their competitors, because Apple's immense cash stockpile - plus their experience with in-house manufacturing - affords them many more options.

4. Apple's competitors are also affected.

So if you want to make 10%, this would be a good time to buy back a little. But not as a long term hold, because that 10% may be all they have left in them (and that's assuming - as the stock price itself assumes - Apple continues its unprecedented success).

No comments:

Blog Archive