Horace Dediu: Investors should expect a 40% drop in Apple shares at any time and for no reason

Martin Bryant has interviewed Horace Dediu for The Next Web.

A few snippets:

TNW: What makes a good analyst and how are analysts’ predictions different in importance from those of a good tech blogger?

Dediu: Apple analysts vary. If you refer to ‘sell-side’ analysts who are working for financial services companies, their paychecks are not tied to accuracy or foresight. They are sold as a resource to clients of the firm and their work is meant to manage client expectations. They depend on access to management and supply chain managers for any differentiation. It is not a recipe for understanding a company’s resources, processes or priorities… There are other observers who are often more insightful. They are not called analysts because they don’t have that job title. They are bloggers or people who may have worked in the industry and can make informed opinions. They are typically more insightful because they are motivated to provide accurate predictions to establish credibility and reputation with a wide audience who is not expected to pay for their work.

TNW: There has been much talk recently on the ‘decline’ of Apple, as reflected in its stock price. What’s your take on this ‘decline’ and the suggestions that Tim Cook should be fired?

Dediu: My rule of thumb is that investors should expect a 40% drop in Apple shares at any time and for no reason. Warren Buffet seems to agree. There can be a long discussion about why that is but I think it suffices to say that there are too many institutional owners, and hence too much concentration of homogeneous thought about the company. Anyone suggesting Tim Cook should be fired is a neophyte.

Read more in the full article here.

44 Comments

          1. How you know? What if apple just goes down like years ago? Can you guarantee? Do not let the history repeat itself! Do your homework about the history of apple! Apple have it’s own style, if you don’t like it, don’t buy apple’s stock.

          2. The investors should just shut up and let Apple continue making me stuff. I look forward to D11 and what Tim Cook has to say about things in general. WWDC is what I’m currently waiting for to make my next Mac OS X/iOS purchasing decision.

            It’s not Apple’s fault that Wall Street is a cesspool that needs an emptying.

      1. “Anyone suggesting Tim Cook should be fired is a neophyte”

        At least you should feel well-defined now. Obviously, you did not read even this brief version of the article.

        Mmmm… How many shares do you own?

      1. Thus the incentive to herd the sheeple. If some manipulator figures out exactly what stockholder buttons to push to make them dump the stock…

        This is all entangled with MARKETING and PROPAGANDA. IOW: Bullshit.

      2. … 40% drop (for NO reason), I’d sell my shares the moment it started! Then I’d buy again as soon as the manipulators had done their worst and started buying again. This might not make me any money, but I’d sure gain a larger portfolio of AAPL in the process. And piss off a Republican in the process, a win all around.

  1. Horace doesn’t know anything special about investing; he’s an accountant who’s good at massaging data.  So he waits until AAPL sells off by 40% and THEN says that his rule of thumb is that AAPL could sell off by 40% “at any time and for no reason.”  That wasn’t his rule of thumb until recently.

    Horace needs to learn how to say “I don’t know.”  Actually, a lot of experts need to develop that skill.

    1. As a super long holder of AAPL (cost basis $17 with one split 🙂 I laughed out loud when I read the 40% statement. Why? Because he’s exactly right. I had to have balls of steel and conviction in Apple’s story and have seem huge stock increases followed by huge selloffs, followed by even larger increases.
      This selloff is no different .

    2. How could they say, “I don’t know?” They’re not getting paid for lack of knowledge. I’m pretty sure that would absolutely undermine any credibility and make them totally redundant. Hell, I can say, “I don’t know” because I really don’t. But no one expects me to know anything. I could make up stories based on rumors, but that certainly isn’t useful to investors. Lying about things don’t do anyone any good except possibly the liars. As far as asymco is concerned, it’s fun to look at Dediu’s graphs, but when he’s showing Apple dominating in a number of areas and yet the share price is way down, I just find it frustrating. At least he’s always said that his graphs and charts have absolutely nothing to do with Apple’s share price and he’s sure right on that point.

  2. What are the requirements on becoming a ANAL-yst Blogger working for the news media? Please tell me. I want this job. I know absolutely nothing about running or consulting a worlds most valuable corporation from experience. Does that mean I automatically qualify?

  3. Clueless. If Apple dropped 40% from here it would be near book value and Apple would go private or anyone else that wants to use Apple’s assets to buy Apple would buy Apple. Do they pay these people to type or say this stuff?

    Clueless village idiot!

  4. Dediu is a gasbag: stocks go up, stocks go down. We get it.

    Apple, at this juncture, is a compelling story. The market will take care of itself.

  5. LOL at all of you bashing Horace.

    Dediu is the best Apple analyst in existence. He knows his stuff, deeply, and he’s the best friend Apple has on Wall St.

    When he says “be prepared for a 40% drop,” he’s ripping on all of the other so-called analysts who have no idea what they’re talking about but continue to do do anyway.

    1. Yes. Some people have a reading comprehension problem. 🙂

      Apple investors must to have the courage to endure potential “40% drops for no reason” for the reward of 400% gain (over time) for very GOOD reason.

    1. Although you could make an argument that given the increased dividend and more importantly the huge buy back Apple has made an effort to attract more value investors and by extension taken a lot of the volatility out of the stock.

  6. There can be a long discussion about why that is but I think it suffices to say that there are too many institutional owners, and hence too much concentration of homogeneous thought about the company.

    YIKES. There’s the message. It didn’t used to be that way. Basing a stock’s price on the emotional whims of massive institutional stock owners is not, of course, sane. I have to compare it to a STAMPEDE of cattle. If you’re a lone bull, you’re gonna get trampled when the HERD goes maniacal.

    Damn! I’ve been in the middle of a small cattle stampede. Not good.

    If only there was a way to mitigate this ‘Apple Bear’ bullshit effect. I suppose it would have to involve limitations on the number of shares that any one institution could trade on any particular day. That won’t happen. What I regularly see instead is a total shut down of trading during bizarro events. Kind of primitive.

    So what does this make the analcysts? The cattle wranglers? The cowboys? The sheeple herders? 😛

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