Historical precedents that show Apple and other tech stocks will go higher

After a strong year for Apple shares and for technology in general – the Nasdaq Composite was up +43.6% in 2020 — it’s normal to see the market consolidate on those large gains. Emerging from corrections, it is common to see another surge in the market, and there are three historical precedents that demonstrate that.

Why Apple stock is struggling

Joe Fahmy for Yahoo Finance:

The first example is 1995. That year, the Nasdaq Composite was up +40% and the rally continued into May 1996. After correcting close to 20%, the next move higher began in September 1996, and ultimately accelerated into the great bull market of the late 1990s.

In 2003, the Nasdaq Composite gained +50% and eventually peaked in January 2004. After consolidating for seven months, the next leg up began in September 2004. According to Mike Cintolo, Chief Analyst at Cabot Growth Investor, “The upmove after that didn’t get far into new high ground, but it was an excellent stretch. That’s when Apple and Google really began their mega-runs.”

In 2009, the Nasdaq Composite rose +44% and continued into April 2010. After a four-month correction, the index resumed its advance in September 2010, and then gained over +30% into early 2011.

MacDailyNews Take: May Apple follow the historical blueprint, soon rewarding patient AAPL shareholders!

8 Comments

  1. Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” the state of the economy, let alone the state of any company represented.

    For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.

    If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.

    Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way — until and unless they sell.

    Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is nothing more than the ability to predict what other traders might do before they do it.

    In other words, “traders” are like sheep… If a few suddenly start to run, they all run and in the same direction. Only afterward will “analysts” attempt to figure out why.

    What’s the solution for Apple? Minimize their reliance/exposure to traders. So, you begin share buy-backs and bond issues – with an eye toward reducing your risk (from traders) or perhaps one day eliminating it! (Get out of the stock market and go private. All they’d really need is lots of money to fund themselves! Hmmm.)

    I’ll get off my soap-box, now.

  2. In 2017, financial analyst published a report about Apple’s expected performance during the summer. It was based on historical performance. His conclusion was “Sell in May and go away”.

    The report was by Alex Cho. I’ve no idea whether he is better than other analysts, but I’ve never been one for predicting future performance according to past performance, whether by Cho or by any other analyst.

  3. Maybe Mr. Cho had special insight and information pertaining to AAPL, but “Sell in May and Go Away” is a statement of broad use…for the stock market in general.

    1. He did explain his reasons in the article which you can find on the Seeking Alpha site. Essentially he was saying that the developers conference wouldn’t drive the stock higher and the next surge would be when new iPhones were released.

      If you look at how AAPL performed over the summer of 2017, he was wrong.

  4. Sure, I hope Apple goes up higher by the end of the year, but there are no guarantees of that happening. It’s one of the reasons I had hoped Apple would offer higher dividends instead of splitting the stock and then constantly buying back shares. I can at least depend upon dividends ending up in my pocket and not having to depend upon the buyback strategy of possibly making Apple stock more attractive to potential buyers. Theoretically, the more shares Apple buys back, the shares I hold are becoming more valuable, but that sure is hard to tell from where I stand. I just have to accept it as fact. Dividends are easier for me to understand as that cash is deposited in my brokerage account every quarter. Apple is doing the buybacks because of better tax breaks for the wealthy investors like Warren Buffett.

    Anyway, I’ll see what happens by the end of the year if Apple’s buybacks are useful or not. I’m hoping they’ll make a difference, but, of course, there are never any guarantees in the stock market, especially in a stock market where some crappy meme stocks are making all the best share gains. I don’t necessarily trust what any of the analysts are saying. For me, it’s all about trusting Apple to be able to sell plenty of products to consumers. Whether any of that money ends up in my pockets as a shareholder, I can only hope for the best. So far, over the years, a decent amount of money has ended up in my pockets and I can only hope that cash flow continues for at least a few more years.

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