What I’m Selling: Apple

I wrote an article about Apple yesterday for Benzinga. You’ll notice the last line of the article:

Disclosure: Wayne Duggan holds shares of Apple and holds a short position in Amazon at this time.

As of about an hour ago, that disclosure line would be about half as long.

Yeah, you are reading that right. Today was a big day for me. As I’ve mentioned repeatedly, Apple was my largest holding, and by a wide margin too. Benzinga doesn’t want opinions, only facts and analysis. So even though I’m not getting paid for this, I need to get some stuff off my chest today here on Trading Common Sense.

I first bought Apple back in January of 2013. The stock had skyrocketed throughout the 2000’s and peaked at a split-adjusted $96.21 in late 2012. Then, as revenue growth for Apple started to shrink, the stock took a major dive. I still wasn’t tempted to buy Apple until the drop got to levels that I deemed absurd. All in all, Apple reached as low as $53.10 in April, 2013, a drop of about 45% in a matter of about seven months.

I remember reading and hearing arguments everywhere about how Apple was “done.” Google and Android were the future, and iPhones were out of style. Apple had no new products in the pipeline that would make an impact. Apple was hemorrhaging market share, “evolutionary” rather than “revolutionary.” Apple was shrinking. Dying. Over.

Making money in the stock market is a lonely game.

If you do what everyone else does, by definition you will not beat the market. To beat everyone else, you have to buy before everyone else buys and you have to sell before everyone else sells.

Back in 2013, I looked at Apple’s numbers, and they didn’t look as bad to me as everybody else seemed to think they were. I’ve written before about how dismal the public perception was of Apple at the time:

…what was the climate like in April of 2013 when AAPL had dipped below $60? Any AAPL shareholders will remember the constant stream of negative news, pessimistic analysis, and bold bearish predictions that were flying around during that period. Investment firm Jeffries cut its AAPL price target to $60 in March, 2012. But Edward Zabitsky had even that horrible prediction beat when, in March 2012, he predicted AAPL would reach $40 by the end of September, 2012.

I saw that Apple still had a good thing going long before it was the popular thing to believe. I had a feeling that everyone else would come back around on Apple eventually, but at the time I could not have felt more isolated in my opinion.

But it’s not the first time I’ve had that feeling, not by a long shot. When I bought Bank of America for $4.96 back in 2009, the things I heard swirling around in the media at the time made me wonder if I wasn’t just flushing my money down the toilet. I didn’t believe Bank of America and the entire US economy would collapse, but it was the prevailing fear among investors at the time. Sometimes, I wondered if I was the lone idiot that was buying bank stocks right smack-dab in the middle of the worst financial crisis since the Great Depression.

I simply believed at the time that the crisis was temporary. Eventually, everyone else believed so too.

I took a huge position Apple in 2013 at just under a split-adjusted $70 per share and felt very lonely about it. I specifically remember having lunch with one of my best friends (and one of the smartest people I know) around this time and telling him that I owned shares of Apple. He is too nice of a guy to say anything, but the questioning look was obvious. “We’ll see,” I said, or something along those lines, “Maybe China will work out.” I punctuated it with a shrug. What else could I say? He had the whole world on his side at the time. He just changed the subject.


So here I sit today, less than two years later, looking at the sell confirmation sitting in my trading account. “Sell- AAPL @ $104.65 Executed 10/23/2014.” And how do I feel today? Vindicated? Surprisingly not. Confident? Far from it.

So how do I feel?


Apple is once again the belle of the Wall Street ball and everybody’s favorite long-term investment. Earnings last week and guidance were through the roof. The new iPhones, iPads, and soon the iWatches will likely set the world on fire this holiday season. Apple stock is once again making new all-time highs day after day.

And I’m out. Done. The lone idiot that’s selling.

The article I wrote for Benzinga yesterday really made it hit home to me: Apple is not a great stock to own anymore. It’s certainly not bad, but it’s no longer special. Where does Apple go from here? Expectations have never been higher for the company’s future since I bought the stock. What is left to drive the stock higher?

Of course I feel good about my 54% gain (including dividends) on my Apple trade, especially since I took such an aggressively large position. Yeah, I was right. And I made a lot of money. I could spend the day dishing out “I told you so’s,” but I doubt my friend even remembers that lunch conversation we had nearly two years ago. And he would probably be far more interested in asking me why the hell I sold my shares today. “Apple is on fire!” he’d say, “And it’s not just me that thinks so. Ask anybody!”

Before I pimp my book, I just want to mention that today is a big earnings day for Amazon shareholders and Amazon shorts like me. My Benzinga article published today that I mentioned includes Amazon as one stock I compare to Apple. I would recommend anyone interested in Amazon read that article as well (find it here) so you can see just how absurd some of Amazon’s numbers are compared to its peers. Earnings expectations for Amazon seem to be pretty damn low, so a big beat and temporary spike in share price wouldn’t surprise me or make me reconsider my short. Amazon’s got a very long way to go to prove to me it deserves anything close to a $300 price tag.

Update 10/23 2014 4:15 EST

Amazon is down over 8% after-hours after a horrible earnings report: http://www.cnbc.com/id/102114940

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