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Everyone who has been around Wall Street long enough has learned the first lesson about investment timing: when financial experts sing in the chorus about buying a stock, it is time for investors to sell or short that stock.
Back in the early 2000, financial experts raved for Cisco Systems (NASDAQ:CSCO), EMC Corporation (NYSE:EMC), and Hewlett-Packard (NYSE:HPQ). We all know how that frenzy ended.
Two months ago, as Apple’s stock was heading for $700, popular stock analysts raced to predict how quickly the stock
would get to $800, even the $1000 mark.
As I pointed out back then, such predictions hype investor expectations, feeding into a speculative frenzy that may not be healthy for the stock.
Now, the same analysts are prompting their followers to sell or stay away from Apple as it trades south of $550. But it is time to buy. Why? Apple’s fundamentals continue to remain intact.
Apple’s stock is trading at a forward (Sept 2014) PE of 9.36, below Google’s forward PE of 15.30 (Dec 31, 2013). But sophisticated investors are concerned about Apple’ ability to continue churning radically new products, rather than different versions of old products developed under Steve Jobs leadership.
| Company | Apple | |
| Forward PE | 9.36* | 15.30 |
| Operating Margin | 35.62 % | 30.76% |
| Qtrly Revenue Growth (yoy) | 22.60% | 35.30% |
| Qtrly Earnings Growth (yoy) | 20.70% | 11.20% |
*FyeSep 24, 2014
+Fye Dec 31, 2013
Source: Yahoo.Finance.com
As of today’s sell-off, I couldn’t find any corporate developments to undermine these fundamentals. What I could gather from the mass media, however, is a great deal of noise about end of the year selling, due to the prospect of higher capital gains tax!
That’s certainly not an intelligent strategy for trading stocks.
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