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Wednesday, January 25, 2012

Time to short Apple?

Apple reported stellar performance for their fiscal first quarter, mainly on explosive iPhone sales.  As of today, with the stock up about 8% for the day and to around $450 per share, Apple is not the largest company in the United States by market cap, surpassing ExxonMobil for the top spot.  You will hear nothing but positive opinions on Apple from pundits across the board, whether they be value or growth managers, fundamental or technical analysts, etc.  So why would I suggest shorting Apple?  Exactly!  Everything positive that could be said about the company has been said, and they have milked their current product line for all it's worth!

I wrote an article not too long ago about Apple and about the loss of Steve Jobs specifically.  My contention is that he was the driving force behind the innovation at Apple, and without his direction, leadership, creativity and all-around genius, I do not feel that Apple will be able to continue to innovate at the same level of quality and output as before.  There are a lot of highly talented people at Apple, but my feeling is that without the glue that was Steve Jobs there, day to day, to hold this team of diverse, highly talented and skilled individuals together, the team will disperse, with members leaving for other, possibly more lucrative, fulfilling, opportunities.  Even though under some valuation metrics Apple is still "cheap," the reality is that the stock has rallied from a low of $310 a share 6 months ago to the current $450, or by 45%.

Shorting is not for everyone, but for those who can handle the risk, and for whom shorting is an appropriate strategy, Apple, to me, is a compelling candidate.

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