Jim Cramer: The action in Apple’s stock is a lesson on buying into weakness

“When it comes to investing, CNBC’s Jim Cramer maintains one key guideline: when the market gives you a chance to buy a high-quality stock, you must take advantage of it,” Elizabeth Gurdus reports for CNBC. “‘You literally have to take action right into the knee-jerk negativity to get the best buys, and that confuses a lot of people,’ the Mad Money host said.”

“To clarify the strategy, Cramer turned to the stock of Apple, one of his favorite long term investments. In September, Apple’s shares fell from $164 to $150 on worries that the new iPhone would not live up to expectations,” Gurdus reports. “But the stock has recently regained momentum, surging to $159 on Monday. In his search for a reason, Cramer kept hearing that nothing was ever really wrong with Apple, it had just run too much.”

“Some people also pointed the Mad Money host to a research note from Keybanc, which upgraded Apple’s shares to overweight from sector weight on the expectation that the $999 iPhone X would boost the company’s profits,” Gurdus reports. “‘Sure enough, when I got the upgrade, there wasn’t anything in therethat we didn’t already know: Apple’s got good pricing power on its phones, excellent app store growth [and an] ever-expanding service revenue stream,’ Cramer said. ‘So why did Apple’s stock roar higher then? My conclusion: it never should’ve been knocked down in the first place.'”

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Read more in the full article here.

MacDailyNews Take: Once again:

AAPL is like a buoy. Quick, it’s back on the surface! You there, analyst, and you, too, swim down and tug on the chain! Drag it under… lower, lower… Good! Now, quick, everybody jump on, and we’ll take a ride back up to the top again!MacDailyNews Take, January 9, 2012

As we wrote in April 2012:

At the most basic level, it’s extremely simple: Pump, then dump. Foment, then buy. Rinse, lather, repeat as the SEC sleeps.

7 Comments

  1. Don’t get too excited, we all know whats happening here. Boost the stock now then short it ahead of the November earnings then tank the stock due to “disappointing” numbers.

  2. AAPL is a very volatile stock, it has swung wildly many times in the past and doubtless will in the future, but the fundamentals of Apple’s business are rock solid, so it always recovers and continues to grow.

    So long as you have the flexibility to buy AAPL at opportune times ( such as those that Cramer describes where they price is low for no good reason ) and you don’t expect to need to sell at a given point in the future so that you are able to sell at an opportune moment, then you can do pretty well out of investing in AAPL.

    If you’re speculating with the hope of making short term gains, then following the herd is unlikely to be the way to do it. You’ll need to be bold and buy when everybody else is selling and then sell before everybody else sells. None of us know when these moments are about to happen, but if you follow Apple closely, you can learn how the stock moves and get a feeling for when it’s undervalued or ripe for profit taking.

    1. I don’t know that I would characterize a 3-4% dip below the 60 day SMA as a “volatile” wild swing. It is for APPL, but it’s not really that wild. It usually moves in a narrow band of +/- 4% over the 60 days SMA. If it’s down 3%, buy. If it’s up 3% sell. We can also predict pretty well when it will swing up and down; annual product announcements and quarterly earnings announcements.

  3. I still don’t quite understand what makes Apple so volatile. Fundamentally speaking, it shouldn’t be as volatile as it is. For a tech stock, it has a relatively modest P/E, the stock offers decent dividends, there have been plenty of stock buybacks and Apple still sits on a mountain of reserve cash with a fair possibility of getting a tax break in the coming year. All this should add up to a stock that should have some stability.

    I realize that any good investor should be smart enough to buy Apple on its dips. That’s a great advantage for those who have the money to do so. I simply don’t understand why a stock like Microsoft is less volatile and nearly outperforming Apple over the last 52 weeks. Wall Street sees Microsoft as a better investment over Apple. Something seems to be wrong with Apple in terms of stock performance and I don’t see the reason why.

    There’s never any worries with any of the FANG stocks. Apple should be able to compete with them but doesn’t. Is that due to poor Apple financial management (I don’t think it is) or something else I’m too stupid to see? I’ve held Apple since 2004 and am quite satisfied with what I’ve made since that time. It’s just that I’m puzzled as to why seemingly weaker companies perform more consistently than Apple does. Microsoft took a huge hit of billions of dollars from Window Phone/Nokia charges and the stock is stronger than ever. Go figure.

  4. Sell? Buy on dips? Poppycock. I bought Apple in 2001 @ $19 and been enjoying the ride ever since. 7-1 split, $96, what the heck, bought a bunch more.

    Sure glad I didn’t see after a 3% gain as some suggested.

    1. I’ve got two lots of AAPL. One was bought well over a decade ago ( at $49 pre split ) and held, the other was bought about ten years ago and traded when I felt that swings would be likely – events similar to those mentioned by Therealspike.

      Both lots of AAPL have done incredibly well, but the actively traded ones have increased in value even more than the ones I simply held.

      The reason why they have done so much better is that my strategy was to sell when I thought the price might be about to drop and then spend that money to later buy a greater number shares at the lower price, doing the same on similar occasions in the future. As a result, my occasionally traded shares have not only increased in value, but have also significantly increased in number, making them even more successful, especially when you consider the dividends too, which were introduced in 2012 ( disregarding nominal dividends which Apple discontinued in 1995 ).

      It’s hard to offer meaningful comparisons because in 2012 I sold enough AAPL to buy the house I now live in and was still able to keep a lot of AAPL anyway, but by that time, the traded shares had increased in number by 80% above the number I initially bought and of course had greatly increased in value too.

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