“There are many contentions why Apple is selling down but none of them are Apple’s valuation,” Darcy Travlos reports for Forbes. ” There is a near consensus that Apple stock is undervalued, if not dramatically undervalued. Here are some possible explanations for Apple’s 27% fall since its high $705 in September.”
“Apple was one of the top stock performers over the twelve months when it hits its high of $705 in September, returning 68% to its investors. It outperformed the Dow, Nasdaq and S&P by over three times. Investors, particularly institutional ones, like to lock in gains under those circumstances,” Travlos writes. “And, as I have written before, Apple, as a top holding in many institutional accounts, often must be sold as it appreciates to stay within a fund’s allocation limits. So, perversely as Apple appreciates, institutions must trim their positions even if they believe it still remains attractive.”
Travlos writes, The selloff at $700 can also be explained by the tax consequences of big stock gains… the looming Fiscal Cliff threatens to tax those gains at 5% to 9% higher than the current rate. So those investors with large capital gains in taxable accounts may have wanted to sell to preserve capital.””
Read more in the full article here.