You’re breaking my heart, Apple.

It feels like forever since I even approached Apple. The story goes something like this: about a year ago, I know for a fact Apple will crush earnings estimates AND go up. I massively buy calls. I’m proven right and I make a nice tidy profit. I keep around a thousand shares of NASDAQ:AAPL, and then…

And then nothing. The stock rises to $134 or so, and then it stays there. It falls a little to $125 - no big deal right - and then it stays there. And it falls to $120. Then $115. Then $110. When it rises back to $114, I liquidate my position. I had enough of Apple and grew tired of it: it just wasn’t moving anyway.

About seven months after I sold everything, Apple is basically back where it was a year ago. It’s basically dead money. You get the dividend, sure, but a niggardly 2% return that is heavily taxed is not even worth considering, let alone discussing.

Seven months of misery. Well no, technically, not misery, but nothingness. Or void, like Sumer would say: seven months of void. You take your money, you place it in a stock and nothing happens. For seven months, you hold the stock, you accept the risk that is inherent to any stock and what do you get in return? Absolutely nothing.

And then this happened:

I’m not going to pretend I saw this coming because very frankly, I didn’t: all I know is that Apple is a stock I wouldn’t want to touch, neither today, nor seven months ago.


Because it’s too manipulated. There’s nothing you can do when a stock is so broadly manipulated and attacked by about every big manipulators on the market today.

For those of you who are new here, Apple is how I made most of my money on the stock market. I was lucky enough to buy a sizeable at $400 pre-split (under $60 today), mostly following the advice of one of my mentors. I’ve made hundreds of thousands from Apple shares over the years; yet, I’ve come to realize one simply fact:

Apple does not have shares

In theory, a share is a portion of a company’s future earnings. If you owe 1 shares and the firm has 10, then 10% of the earnings are “yours.” If earnings go up, it should become clear that the stock price should go up as well.

In practice, though, you’ll almost never receive the  company’s earnings, and when you do, it will be heavily taxed and cut, under the form of crap-dividends, which you don’t want anyway. It’s not like you can go atMicrosoft’s HQ and ask for your share of the quaterly profits, you know. Well, technically, you can, but they won’t give it to you. Thus, on the stock market, there is only one real way to make money: resell a share for more than you bought it. This implies finding someone ready to pay a higher price than what you paid for a stock. Now, except in very rare circumstances, there is no guarantee anyone will ever buy a share for more than what you paid for.

In other words, in practice, earnings, revenues et al. don’t matter nearly as much as they should. A company could report a gazillion dollars in profit, if there is nobody there to buy your shares, then you can’t turn a profit. Company A could announced increased profits for 20 years in a row, it doesn’t necessarily mean that the stock will go up.

That being said, most companies do follow the theory, meaning that the stock will go up as earnings go up - most of the time. Sometimes, though, a stock will go up even as profits and revenue fall, and vice versa.

And then, there are companies like Apple.

After years of following Apple pretty much daily, I have come to the conclusion that Apple shares are not technically shares. Sure, in theory, they are, but in practice, they are used as proxy for almost anything you can think of. Think the tech market is going to crash? Short Apple. Think bonds are going up? Short Apple. Think a recession is coming? Short Apple.

Perhaps because it is so big, or so ubiquitously known, or perhaps so widely spread, Apple is used as a tool for just about anything. Again, in theory, Apple’s stock price should follow its earnings, revenues and so on, but in practice, Apple’s stock movement make little sense. At today’s price, it’s quite obvious that Apple is critically undervalued. With $290B in the bank, the entire company is roughly valued at $280B, or around 5 times its yearly profits! Even if you remove the repatriation tax (since most of Apple’s money is offshore), Apple is so undervalued it defies logic.

But none of this matter and I really wish I had understood this part earlier. Overall, it matters little if Apple beats estimates or fails; in the grand scheme of things, the crisis in China, the rising USD or Europe’s woes are far more important than a measly quarter of earnings. Think Europe will fall? Well, Apple has stores there, so short Apple. Think China will fail? Betting on an Indian crash? You get the idea.

Apple does not have shares: it offers some kind of byproduct, perhaps even a derivative product, that can go up and down 10% in a week for no reason at all. By any theoritical measure, Apple is a “top pick” right now and it should trade well above $150. But you know what? What “should” and what “is” are completely different.

Would I buy Apple today? Obviously; again, it’s a screaming buy. Am I going to? No, this stock is a nightmare and a mess and you have no idea what can happen. Perhaps tomorrow morning BIGFUNDINC will decide that that oil will soar and that iPhone sales will sales because of it and will short Apple. I like to compare holding Apple as playing Texas Hold’em with a strong starting hand, but without seeing one card on the flop.

Truth be told, Apple will most likely remain depressed for a short while - at least until the iPhone 7 hype and perhaps until next January, when it will once again obliterate earnings estimate. There is no reason to hold it until then, unless you like another seven months of “zero returns.” There is no way to tell how far it can fall: it all depends on how much the stock manipulator decide to crash it. All I can say is: when it will rise back up, and it will, it will rise fast. Don’t be surprised to see at 15% rise in 3 days or something like that.

It pisses me off that those scammers can play with stocks like it’s nothing, but that’s how it is. There’s nothing I or you can do about it. Welcome to the stock market, where law and fairness don’t exist.

You’re breaking my heart, Apple.

P.S.: What would I do if I was Tim Cook? Nothing. Nothing different from what he’s been doing so far. He’s taking all the right steps.

Liked it? Take a second to support F.S. Comeau on Patreon!

, , , ,

6 Responses to You’re breaking my heart, Apple.

  1. me April 27, 2016 at 12:58 pm #

    i bought my first 4 shares of apple today, let’s see how it goes.

    I also bought MNKD #YOLO

  2. DoubleOhDiv April 27, 2016 at 4:22 pm #

    Hmm I know one of your prior articles blasted dividends, but don’t you think that is something that can help break Apple out of this funk?

    i.e.: If they keep crushing earnings, they’ll easily be able to afford increasing the dividend which will help to put a floor under the share price.

  3. archaic April 28, 2016 at 5:53 pm #

    so you made most of the money gambling in call options in one particular stock (sounds like a very odd strategy to me) however consider yourself an advocate for value investing approach as if gambling on earnings and longterm investing are somehow related. Probably its ok, but if this weird option strategy can’t be replicated in some other stocks (and obviously it can’t) the result itself can be only attributed to dumb luck and not to any set of fundamental rules.

  4. BetaAlpha April 29, 2016 at 9:43 pm #

    What we see here (IMHO) is market doubting AAPL again. It’s doubting the sustainability of revenue, margins and earnings. Some of it is fears about China reigning in AAPL, some if it is whether new products will be able to succeed as much as the previous products, etc. Some of it is the shareholder base churning over - from the GARP to VALUE.

    None of this should surprise/shock someone who’s been in the market or more than a year. AAPL has been here before (in 2013).

    If you think market is wrong, just buy the stock!

    By your definition, every stock in some sense, is manipulated. In the short run, the stock price is decided by a sucker with the most money.

    Not sure what this post is about honestly.

  5. Lee May 13, 2016 at 4:03 pm #

    What price would make Apple a buy to you again?

Leave a Reply