Apple Inc (AAPL)

Market is driven by earnings and fundamental growth, but it is also driven by psychology. The drop in stock price from $700-$523 is more because of psychology because not much is changed with this company.

Big question “is it a value trap, or not” as it looks cheap at only 11X forward earnings. If you look at the 2^nd derivative of earnings, this company has very, very high margins. A company that attains the margins they have seldom keep it. As the innovation cycle has waned, we will see the competition come in and continually chip away at those margins. Thinks it is a value trap.

Has not violated a long term trend line. It could go down to $490 and not violate it. The selloff is over. It could still run up, technically.

Buy Feb $500 Puts / Sell Feb $520 Puts. There are very low expectations from the street and he doesn’t think they will do that badly. Even if they go nowhere you make money with this strategy.

The Eliot wave theory says there is 3 waves. The middle is usually the longest. They we had the third and final wave of this bull cycle. There is psychology behind it. Thinks the stock will settle down and have a down wave possibly $450-$500 and be there for a while.

Has sold off by over 30% for no particular reason. Trading at 14X trailing earnings and with cash on the balance sheet and a dividend yield of about 2%, this is now a value play. Doesn’t have to grow at much more than 15% per year to justify a $600 stock price. With Apple TV, it could be a game changer for the entire entertainment industry, and this is not valued at all in the stock.

(Top Pick Dec 14/11, Up 40.12%) There was lots of noise, some artificial. This is a sell off due to a tax story.

Doesn’t know that it was unjustified that it was driven down so much. There are a lot of fundamental impulses and there is a lot of psychology. There is the chance of cap gains taxes rising and triggered the taking of profits and that started the sliding and then it became a momentum play on the downside. He views this as opportunity. They are a supply constrained company – they can’t make them fast enough. Margins will drop because of change of product mix. The iPhone is a very high margin product. Lots of cash. Own this in balance. He trimmed 6 or 7 times since he bought it in 2006.

Has full confidence that the company is going to do great things with future iPhone sales and tablets. Has a price target of $750. There is still one week left for tax loss selling, so the next 5 days may lead to volatility.

(Top Pick Feb 02/12, Up 19.30%) Skeptics are looking for a justification for the fall. He thinks it is the lack of a special dividend and both tax loss and tax gain selling because of taxes going up. Has had a good run. There is nothing fundamentally wrong with it here. Had the death cross in 2006 last time which gave him a 10 bagger.

Stock shows 20% earnings growth next year. Could pay out cash as a special dividend or could buy back shares. New products, updates to products. Catalyst to go higher would be Apple TV. It is a cheap stock based on fundamentals.

(Top Pick July 6/11, Down 3.14%) Looking at their earnings thinks their next two quarters will be good. iPhone is a very high margin product, most of their profits come from the iPhone and now they are going to sell it in China. Really good value play and a buy under $600. Thinks they should just go out and buy something at this point.

We all know the story. Hit $700 in Mid Sept and then a 20% correction. What is happening is that people are starting to question whether there is innovation left in the company. Financially, all companies are priced at figure cash flows discounted back. People are questioning whether the future cash flows will be declining. He thinks the market has over discounted future cash flows.

(Top Pick Nov 28/11, Up 50.16%) Perfect storm between the round number of $700, then those that wait for 5% down, then 10% and then there was the ‘I told you so’ crowd. It looks like it settled out here. China Unicom said they are bringing the iPhone 5 into town.

Bought it just as it was testing the 200 day average and was stopped out. You never know exactly where the bottom is going to be. They are going to run into margin pressures in the next couple of years. Thinks there is a bounce coming with the markets.