If Apple goes, the whole country goes

“The world’s most valuable company has turned into a bit of a casino stock,” Angela Moon reports for Reuters. “Since Apple Inc on February 29 became only the sixth company in U.S. history to top $500 billion in market capitalization, trading has become more volatile, indicating that more investors are tracking headlines and looking for quick gains.”

MacDailyNews Take: Perhaps investors simply see the P/E/ ratio and think it’s ridiculously low based on the company’s performance and growth possibilities?

“Apple has gained 32 percent since the beginning of the year, outstripping its gains for all of 2011,” Moon reports. “It accounts for more than 4 percent of the weight of the S&P 500 index, a kind of outsized standing that has caused its moves to dictate market direction on a daily basis.”

“For long-term investors, the stock of the iPad and iPod maker has been a winner, the ultimate in buying and holding. From a short-term basis, buyers have gotten much more fickle,” Moon reports. “‘Apple has become a favorite daytime trading stock for short-term traders. It’s one of the rare stocks that have momentum followers and that move on headlines that are not related to earnings,’ said David Rolfe, chief investment officer at Wedgewood Partners in St. Louis, Missouri. The firm manages $1.5 billion in assets and owns Apple shares.”

Moon reports, “There are concerns that Apple, because of its size, will start to hurt the overall market should the euphoric trading that pushed it to a record high of $548.21 on March 1 subside. ‘We used to say ‘if GE goes, then the whole country goes.’ Now we say ‘if Apple goes, the whole country goes,” Rolfe said… Despite the high price, Apple look like a value stock. It trades at 15 times earnings, close to the 14 earnings multiple of the broad S&P 500 index, even though its earnings per share grew nearly 83 percent last year, nearly four times that of the broad index.”

Read more in the full article here.

24 Comments

  1. This is exactly why they need a dividend. To stabilize the stock by encouraginge long term investors, not traders. it would still go up, it just wont be as susceptible to getting played the way it does.

    1. Exactly. With a dividend the traders would have to be more careful about dumping shares and driving the price down too much. The lower price would raise the dividend percentage and the stock would be bought back up much quicker than before. Traders would have to worry about missing the ride back up. It’s the traders who don’t want a dividend.

  2. There’s a lesson here: find good companies to invest in that have no debt, solid earnings and earnings growth, and hold on to them. Don’t worry about daily volitility. In fact, the longer you hold a stock, the less volitility it becomes. The only people who worry about volitility are day traders (a loser’s game) and institutions who use volitility to their own gain.

    Apple still has room for growth and share price appreciation as long as earnings continue to climb. As it is, the stock price still lags earnings growth, so it is still a fair bargain. A stock’s price typically does not move in lock step with its earnings, and for smaller investors like us, it means we can still buy at an attractive cost.

    Much of this article is little more than chicken little fears of the unknown. What is known us that Apple is continuing its earnings acceleration. That is why I discount much of the FUD in this article.

    1. Yup, but the U.S. might also take some pride in inventing the transistor, microchip, laser, Heimlich maneuver, hydraulic brakes, tractor, airplane, communication satellite, lunar module, and electric guitar.

          1. Nope, tax collection was the second oldest profession. All that income generated by the oldest needed taxing.
            And the third oldest profession?
            Accountants specialising in tax avoidance.

  3. Ummmm….. ‘Apple has become a favorite daytime trading stock for short-term traders. It’s one of the rare stocks that have momentum followers and that move on headlines that are not related to earnings,’ What time frame is he talking about? This has been the situation for years. Has he just now “analyzed” this?

  4. Total BS. Apple is trading up 32% this year because Apple had an absolutely mind-blowing Q1 which was announced — wait for it — at the beginning of this year!

    Gee, imagine that!

  5. “There are concerns that Apple, because of its size, will start to hurt the overall market should the euphoric trading that pushed it to a record high of $548.21 on March 1 subside.”

    Euphoric trading? After a whole year in the doldrums due to the impending and actual death of SJ, despite a sustained 30%+ growth in earnings, Apple finally resumes the price appreciation it has historically enjoyed for the past 10 years and it’s “euphoric trading”? Where have these people been for the last 5 to 10 years? Not paying attention, wherever they were. That’s for sure.

  6. if Apple goes, the country does go.
    that’s because we’re a nation of pure greedy capitalistic egocentric neurotic unrealistic individualists.

    HYPOCRISY:
    there’s no solidarity or social net as in other more civilized nations. god is money here. religion is so superfluous, we are fanatic about multiplying millions of denominations within christianity as we disagree with every f’g sentence in the Book. that’s why 911 happened – all police, via, fbi, nsa dept. etc. did not share info. we compete till death do us part. we even send our kids to be killed for fake wars. we do not learn from Vietnam. all the new wars we fight with all our might, money, weapons etc – did anyone notice we have not won a single war?! yet we waste more taxes on frivolity & violence to no end.

    MALEVOLENCE:
    the point is this. we’re sick.
    we are the only nation that love a market darling like apple yet simultaneously obsess about its downfall. why?! Apple is the only recession-proof firm we have. the only true symbol of American Excellence there has been in the last decades. though that’s as arrogant as calling Baseball the World Cup when no one else but us Gringos plays it. the only one in the black is Apple. Apple is THE U.S. firm we CAN all be proud of in the world.

    PIRATE:
    yet we cry foul?! Apple is not abusing child labor just because the competition bribes journalists to spread fud, when all the competition use Foxconn in China themselves! conspiracy theories do not apply to Apple, they are the only firm that has not lost their mojo or creative pirate spirit.

    TAX:
    then we cry Apple should bring in its cash to pay taxes. for God’s sake get a life.
    1. our politicians screwed up taxes.
    2. ask the bailed out banks for it back. or the auto industry, except for Ford who proved all wrong.
    3. Apple works harder than anyone, why should it not enjoy the fruits of its labor?
    4. Apple needs money to sue everyone that copies them.
    5. Apple should not waste more on taxes than it does as taxes are always misused without consent of the people i.e. invented wars, fake bailouts, and a government without a plan, because we’re self-competitive or self-destructive…
    6. Apple creates 541,000 jobs in usa – any other complaint?!
    7. as for why Apple outsources, bloody hell, can we be realistic?!
    which co. does NOT outsource?!
    anyway, outsourcing helps people across the globe who need to earn a living just as much as we do.
    Germany’s a swell example. they are a double miracle economy, and now on their 3rd miracle. they had the biggest standard of living, yet unlike most Westeners who bitch about the East stealing our jobs, they restructured. they reinvented themselves. why keep talking. let’s stop blaming scapegoats. what goes around comes around. we’ve been lazy or at least not using our democratic rights to put the right politicians in place. so they took over. it’s their rightful turn, the Chinese etc. it will only return to us, if we reboot everything, and we go right back to our founding fathers or start from scratch. otherwise, our money notes should say instead “God Help Us”.
    8. everyone believes Billy Gates of Hell is so generous. for decades media & public cried for him to sure his wealth. he only focused on his Foundation after retirement – what else is he going to do with his time? not to mention his floundering Microdough? Steve Jobs was the real philanthropist as he and his wife always gave, but anonymously or transparently – not for a plaque at some hospital entrance for ego. most charities waste your money through bribes & misused funds – which is why Body Shop’s Anita Roddick invent “Trade not Aid”. this is real charity. which is what Steve did – his wife continues to give to education – which is much more useful than throwing money at a problem, since money runs out & then the needy are no better off. why should Apple then be taxed to death, when that money could be used for education etc. the gov. spends not on education! we have the worst public schools and keep cutting the Arts etc, but we have endless donations to wars & weapons & prisons?!

    DIV:
    Apple should not pay dividends either. the theory is selfish. shareholders are greedy. they made plenty with the stock. the dividends won’t add much at 3%. plus those millions should be reinvested wisely by Apple who unlike most competitors do not waste on useless acquisitions! which is the fear in that theory too, excusing the why to spend on dividends instead.

    IRONY:
    everyone, personal, corporate, political…knows better than Apple. we all tell Apple how to, when to, why to…and yet, we are all poor bastards who never amounted to inventing things, changing society not just once but 7 times over etc. we who know better, just don’t walk the talk, yet we still bitch? has Apple not proven itself competent more than anyone & anything the world has ever known, only besides Mother Nature?! come on! give it a break.

    NO COUNTRY:
    no Apple, no country.
    Apple has more cash than our country. apple creates jobs. apple (re)invents stuff. apple does things – the Right Stuff. Apple is one of the most eco-friendly manufacturer. Apple has taste. they’re the only firm that understands us, Zeitgeist & uses Gestalt…Apple is so much more than a brand. hate it or not, whose your daddy? who do you know that gave so much, reinvented so much, did so much right, or at least improved things for as many people as Apple?! seriously?

    in any case, if our country were run as efficiently, smoothly, as Apple, our infrastructure would not be worse than in the Third World, neither would our education, manners, philosophy, diplomacy, business acumen, inventiveness etc. certainly, Apple understand the scale of economy better even than theoretical Bernanke & other incompetent schmucks who we still don’t’ fire to run our country to the mud. to think that we blew Bill Clinton on a blow job, when Bush killed innocent countries & Bernanke screws everyone – but that’s ok, right?! Where’s Bill now! at least he was creative, but did his job.

    if Apple ran our economy, money solves most of our problems. moreover, under Apple, we would have no debt, no misused funds, a swell infrastructure and for a nation so proud, we wouldn’t be 30 years behind in Speed Trains or 20 years behind in Wireless Tech etc!

  7. Moon & Frankel haven’t a clue between the two of them. Their article essentially reveals the earth-shattering news that some investors place their bets based on economic measures, and some just roll the dice based on emotion. Neither has a thing to do with economic footings of nations, which across the globe are being eroded by corruption at all levels. Never before in my lifetime has there been such a disconnect between Wall Street and economic footings of governments, which over time have become hollowed out by profiteers and their lobbyists, gerrymandered into powerless and actionless argument chambers that stand aside while corporations run roughshod over international markets, selling junk investments, leaving governments and consumers to pick up the bag when the bombshells hit. The chicanery that led to the meltdown of 2008 persists. No single company, no matter how honorable, is going to prop up international markets while such corruption persists.

    Much as Americans condescend the financial straits of European spendaholics, US fundamentals have eroded scarily in the past 4 decades, both citizens and their representatives taking on unwise personal and public debt to sustain high living standards while exporting jobs abroad. Debt ratios are out of control, and they started going out of control long before this century began. Just ask Reagan budget advisor David Stockman, who now essentially condemns everything that the GOP has touted since his time in Washington D.C.: http://www.politicalhotwire.com/economy-business/65952-former-reagan-budget-director-fears-another-collapse.html

    Well, job creators, we’re waiting. You’re enjoyed 5 decades of declining marginal income tax rates. You’ve bought Congress with your professional lobbyists. You’ve eliminated productive work and successfully gerrymandered markets to reward money-movement with low capital gains tax rates, and you’ve dumped all your bad debts on government agencies. So where in your home countries are you actually creating jobs?

    No, the country is not going the same way Apple is going. Goldman Sachs and its ilk have sold America down the river, and only precious few firms like Apple have successfully bucked the long slow trend downward toward economic insignificance.

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