Apple: still the same story with a few added chapters.
- Apple now has protection from plunging with a $10 billion buy back program. At the current price that is about 16 million shares removed from float, which will at the same time drive up earnings per share with less shares publicly available. So that is a twofer.
IBD’s Rules for Investment Success #17. Check into companies buying back 5% to 10% of their stock and those with new management. (2% is not a bad buy back for the biggest company in the U.S.)
- Apple dividend signals the end of growth and beginning of stagnation? Does Apple quit dominating and growing because of a dividend? They paid a dividend because they just had way to much money on the balance sheet and nothing productive to do with it all but give it to share holders. This opens the door to whole new buyers, the income investor and the mutual fund managers of all the funds that can only hold dividend paying stocks.
- An Apple market cap of $500 billion is not too high when they are holding 1/5th of that in cash and growing earnings at 68% a year. The fact that people believe it is too big to grow is what keeps the P/E multiple down, when they are proven wrong the stock reprices after earnings.
- When a stock is at all time highs and everyone has made a profit, holders are not eager to sell, but people on the sidelines are eager to get in. This creates major support at key moving average levels, the 5 day ema, the 10 day sma, and the prize of the 20 day simple moving average.
- Contrary to belief this stock is not a mania, it is not parabolic, and is no where near euphoria, it is a story of fundamentals and earnings and sales growth that has rewarded this stock. Anyone who thinks this is a bubble needs to go back and study real bubbles like the tulip craze in Holland, The Great Crash of 1929, or the dot com bubble of 1999 and 2000.
With all this said we still must trade the chart, cut losses short risking no more than 1% of our account on any one trade. Always remember ANYTHING can happen in the stock market and you have to go with the flow and not be stubborn in your opinions if you want to win.