No matter how you look at it, Apple’s shares are cheap

“Apple’s late co-founder, Steve Jobs, was a most quotable fellow, but some of his best stuff is not cited frequently enough,” Tiernan Ray reports for Barron’s. “‘I’ve never been able to figure out Wall Street,’ said Jobs in June of 2008, after Apple’s shares had gone on a wild 12-month ride, falling 40% from their all-time high at the time only to come roaring back 60%.”

“My colleague Jack Hough notes that CNBC’s Jim Cramer said earlier this month that the vast majority of the sellers of the stock were investors with big capital gains, looking to avoid higher tax rates next year — a ‘reverse January Effect,’ as it were,” Ray reports. “Whether that’s true or not — and Jack notes that there’s no clear evidence that it is — Apple’s shares look attractive, he writes, at $509.59, down 30% from their all-time high.”

Ray reports, “To that I’ll add that the company’s shares will eventually rebound as it refocuses on what it does best, making great products that generate huge amounts of money.”

Read more in the full article here.


  1. Cheap is a relative term. AAPL is still up twenty five percent this year. If you got out when it hit its peak it looks delicious now. Providing it goes up from here. I did get out at the top and I do think it will go higher to start the year so I have all that profit to buy back in down here. And I will start looking to get back in next week. For those who didn’t realize their profit a few months ago, it doesn’t look like such a great bargain. I sold AAPL 3 times last year. Hardly day trading or market timing.

    1. Assuming you got out at the very top {unlikely} which would be 700 and also assuming you’re in a 25% tax bracket and going by the fact that you sold 3 times last year it was a short term capital gain. So lets say you had 100 shares that you bought at $350 a share thats $35,000. And if you sold at 700 that would be a $35,000 capital gain and a $8750 tax. That leaves $61,250 to buy back shares. So if Apple doesn’t drop to $612 or lower you can’t buy back the whole 100 shares. Sooner or later you’re going to get caught and lose out. I don’t see the benefit. I think it makes more sense to just hold.And the scenario I just mentioned is if you managed to actually get out at the very top and had a 50% gain. Just a thought i could be wrong.

      1. Options. No shares for 21/2 years. And I did get out at near the top : $700 as I stated back in September. So it is more than likely, it’s a fact. I was called foolish here back then but not since the nosedive. It would have been foolish for me to have been so greedy as to have stayed in AAPL with so much profit. I try not to be greedy or foolish. So I appreciate your calculations but considering that almost all of my AAPL investment is in IRA’s, it doesn’t apply. I don’t get “caught” because I don’t day trade. I am simply simply smart enough to know when I have enough profit and a stock has been on a tear. Then I pull out and patiently wait (never too long) for a much lower entry point. It’s not complicated and I don’t have to be in AAPL every day of the year. You don’t either. As I said, I only do it occasionally so it’s very simple. Buy low sell high. It’s what you hope to achieve when you invest. Right? You can try to argue that it’s wrong but it’s what we are all taught as children. Don’t be greedy or foolish. I also take some of my profit and diversify in other equities. I have done very well in PCLN,IBM just to mention a few. PCLN has made me a lot of money this year. Better than AAPL. I also stick money in good mutual funds. I guess you think diversifying is as bad as knowing when to take your profit in a stock? And you do see the benefit because it’s just common sense. Hold? Forever? For what? Nothing goes up forever. You are the one who will get “caught” holding the bag. Next time or if you’re ever really ahead in an investment, try taking at least your original investment out and use house money to continue. Take your original investment money and wait for a lower price to get back in. Also put some of that money in different stocks or mutual funds. Diversify. I learned the hard way years ago. I’m speaking from experience. It wasn’t pretty and it wasn’t fun. But I did learn to never put all my money in one place and stay in too long. I remember it like it was yesterday. I love AAPL as an investment and Apple as a maker of what I use to make a living. But it won’t go up forever. You can take that to the bank.

  2. One way to look at it is that buy aapl now and the chances are very good that the stock will go up to 700 again in 2013. That in itself is a 40% gain. Sadly, I have no spare cash to invest in or would be in this big time.
    The guys that cashed out to pay capital gains at the lower rate will be buying in again in January so the stock will be bouncing back for that alone.
    Add in the likely domination in sales over Xmas and aapl will be looking very attractive.

  3. I’m not sure it’s fair to say Apple has been unfocused during this stock price debacle, so it has nothing to refocus on. I can think of nothing Apple’s done to justify this sell off. It’s definitely been firing on all cylinders this year.

  4. Year, sure, Apple is cheap. Look, the same thing was said when Apple was at $600. The same thing might be said if Apple hits $450 (don’t say it can’t happen because I’m sure it can). None of this means anything to Apple as long as the company is making plenty of money internally. Only long-term shareholders are getting the crap kicked out of them. It’s a topsy-turvy market where the hedge funds play the market like it was a casino, betting on longshots. Those guys move money around on every rumor and have no loyalty to any company.

    Apple is cheap, but there are plenty of companies that could be said are cheap if you mean they have quite a bit of upside which is important. If you mean because Apple has a low P/E compared to the rest of the S&P 500 then that’s something else. That still doesn’t mean that Apple is attractive to investors. Maybe many hedge funds think that Apple doesn’t have a huge upside. Whatever. All I know is I’m holding a $500 stock that used to be worth $700 a few months ago. The tears in my eyes tend to blur my overall vision of rationality.

    I know that Apple is doing very well with the fundamentals it has especially when compared to most companies, but that has nothing to do with its share price going up higher. Market fear could drive Apple’s share price down further and hold it there for many more months. I’ve seen that fear happen in 2008/2009, so it can certainly happen again.

    1. I don’t feel that long-term investors are feeling that much pain. After all the stock is up 30% for the year. Only Amazon matched that for big name tech stocks.
      Long term investors will have bought in at a much lower price. Even with the recent drop my stock is 600% since I bought in in 2007.
      Very few stocks have performed like that over the last decade. Certainly companies with the cash and customer base as Apple. Long term means longer that 3 months. Over years aapl will grow but fluctuations like this will happen.
      For short term growth, play the game and hope you win. If you want more security be patient and the stock will reward you.

  5. Now is not a good time to be in the stock market unless you have millions of dollars to invest or are a hedge-fund manager. The market is a rigged game, where the big players take the profits and dump the losses on the small guys. The ordinary investor, folks like you and me, are coming around to an understanding of this, and are pulling out of stocks in droves.

    “Ordinary folks losing faith in stocks”

    Defying decades of investment history, ordinary Americans are selling stocks for a fifth year in a row. … It’s the first time ordinary folks have sold during a sustained bull market since relevant records were first kept during World War II …

    A lot of scary stuff in the article, including the fact that the most of the buying these days is from buybacks. Yeah, this “bull” market we’ve had has been due mostly to companies buying up their own stocks.

    So hey, if you’re doing well in the market, ignore this. But if you’re not, or you’re standing on the sidelines wondering whether to get in, this probably isn’t the time.


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