Apple
The Dow Is at a Record High, but Institutions Are Selling
By George Leong for Investment Contrarians | May 14, 2013
The shares of Apple Inc. (NASDAQ/AAPL) have been on a steady climb since plummeting to $385.10 on April 19; but my sense is that the buying has largely been driven by retail investors and not from where it counts with the institutional money, based on my stock analysis.
Insiders and the institutional money are not as supportive of Apple, according to my stock analysis. Over the last six months, insiders have sold Apple in 10 transactions totaling 127,896 shares, while there was only one insider buy of 1,780 shares, according to information by Thomson Financial.
Institutional buying, which I believe is the key to stocks due to their knowledge on the companies, is also refraining from buying Apple, even at the much lower price. My stock analysis indicates that institutions have unloaded 27.8 million shares of Apple with institutional investors’ ownership declining 4.5% on a quarter-to-quarter basis, according to Thomson Financial. Some of the biggest sellers include Capital World Investors (-56.3% in Apple stock), Wellington Management (-48.9%), HSBC Holdings (-62.6%), and BlackRock Advisors LLC (-48.2%). My stock analysis notes that this selling suggests a lack of confidence in the company, even with Apple shares plummeting down more than 40% since the company’s high point.
Based on the lack of buying by the insiders and institutions, I would still be wary of buying Apple at this point. In my view, Apple is more of a trading opportunity than a buy-and-hold.
The reality is that following where the professional money is flowing gives us another tool to evaluate the stock market and get a sense of what is happening.
The concept of … Read More
Microsoft at 52-week High: What’s the Fuss?
By George Leong for Investment Contrarians | Apr 29, 2013
Apparently, someone forgot to tell the market that Microsoft Corporation (NASDAQ/MSFT) was a dead investment and not worth buying.
Following a lackluster launch of its “Surface” tablet and “Windows 8” operating system, Microsoft quietly moved to a new 52-week high of $32.84 last Thursday.
In its fiscal third quarter, Microsoft reported revenues of $20.49 billion, now on target for fiscal 2013 revenues of $79.16 billion, based on the Thomson Financial estimates.
My stock analysis indicates that the current uptick in the stock price is being triggered by optimism toward the company’s focus on touch-screen computing and mobile devices, along with greater demand for Microsoft’s “Xbox” gaming platform.
Revenues in the company’s entertainment and devices division surged 56% year-over-year to $2.53 billion. The company is set to launch its next-generation Xbox, with its “Xbox LIVE” currently having over 46 million subscribers worldwide, according to Microsoft.
The upward move in the share price and its sustainability will be dependent on whether this former darling of Wall Street can recapture some of its former glory, based on my stock analysis.
One thing is for sure: my stock analysis suggests that Microsoft is no longer the intriguing, can’t-miss stock that it used to be.
Microsoft is not Google Inc. (NASDAQ/GOOG).
My stock analysis suggests that for Microsoft to steadily move higher, the company will need to generate higher revenue growth than the current 7.4% and 7.9% that is estimated for fiscal 2013 and fiscal 2014, according to Thomson Financial.
Microsoft trades at a lower valuation than Google, but this is due to Google’s much higher estimated revenue growth rate of 43.0% and 15.1% for … Read More
Momentum Is Great—If You Are on the Right End
By George Leong for Investment Contrarians | Apr 23, 2013
Apple Inc. (NASDAQ/AAPL) finally broke below $400.00 last Thursday, an occurrence that I recently discussed in Investment Contrarians. As I said, the short term will generate volatility for the stock, but I continue to believe there is still hope the company can turn around going forward.
The problem with a momentum company like Apple is that with its rapid rise in share price to over $700.00, there’s immense risk for investor mistakes to occur if the company does not consistently deliver. And I’m not talking about delivering just average results; momentum companies such as Apple have to deliver exceptional results to the market and please investors.
In the case of Apple, soft growth over the last several quarters has proved devastating to the stock and can cause investor mistakes.
After beating Thomson Financial earnings-per-share (EPS) estimates by 22.5% in the fiscal 2012 second quarter, Apple came back and offered up three straight dismal quarters in which the company fell short on earnings in two of the three quarters and barely beat in the most recent. Ignoring these falls inevitably led to investor mistakes, as demonstrated by the share price.
The same is said for the overall stock market. Traders gave investors strong gains in the first quarter, but that has not been the case in April, as global growth concerns are surfacing. The aftermath has been selling pressure and the greater likelihood of more selling down the road.
The two cases of Apple and the overall stock market demonstrate the need to be careful with momentum stocks to avoid potential investor mistakes.
The reality is that once the market euphoria … Read More
Technology Sector at the Bottom of the Pack: Time to Give Up on These Stocks?
By George Leong for Investment Contrarians | Apr 17, 2013
With capital shifting into the perceived safety of blue chips and large-cap stocks, small-caps and technology stocks have been declining on the charts.
Given the advance so far this year in the equities market, it’s understandable to expect some hesitancy.
The Dow is up 13.4% as of April 12, and it’s on pace for a gain of 47% on an annualized basis.
I doubt this will happen and expect market adjustments in the equities market along the way. The same goes for the S&P 500 and the other key market indices.
Small-caps in the equities market have also fallen off since the end of the first quarter.
At the back of the pack is the technology sector; but there has been a lack of strong leadership from any sector, including the semiconductor, Internet, and technology sectors, in general.
The following chart shows the recent movement of the three sectors (semiconductor, Internet, and technology) since March and their sideways direction.
Chart courtesy of www.StockCharts.com
Without any leadership in the equities market, the NASDAQ and technology stocks will continue to drift. However, there are some opportunities for speculators searching for contrarian situations.
The Internet sector is flat and lacking a clear direction.
In the stock chart below, the First Trust Dow Jones Internet Index (NYSEArca/FDN) fund shows the sideways channel that has been in place since late January.
Extrapolating on this data, I don’t see any strong and clear signs of a breakout at the top channel line, but if you think longer-term, there are opportunities in the equities market.
Chart courtesy of www.StockCharts.com
The “Best of Breed” in the Internet sector … Read More
Apple Has Not Lost Its Shine, Whisper Numbers Coming in Above Consensus
By George Leong for Investment Contrarians | Apr 15, 2013
Apple Inc. (NASDAQ/AAPL) has been punished in the financial media and on Wall Street, having lost its edge. Trading above $705.00 in September 2012, the stock has snapped back to reality, recently declining to a two-week low of $419.00 on March 4, 2013.
At the current price, there are arguments on both sides regarding whether Apple is worth a gamble or if it is the beginning of a new downtrend below $400.00.
In my view, the business landscape for Apple has become much more competitive. You have “Android”-powered devices accounting for a large portion of the smartphone market. This is mainly thanks to the overwhelming success of Samsung Electronics Co. Ltd.’s “Galaxy” series of smartphones and tablets. I have both an “iPad” and a Galaxy phablet (a large smartphone with the capabilities of a tablet). I must admit after using the iPad for a few years, I actually find it much better than the Galaxy.
Yet the market is still mixed.
While the iPad remains the dominant tablet, Apple’s reign in the tablet sector is clearly in jeopardy; but in my view, until a better tablet surfaces, the company will continue to produce the top tablet.
Investment manager Ken Fisher increased his holdings of Apple by 58.12% at prices ranging from $420.05 to $549.03, with an average price of $467.05. (Source: “Ken Fisher Buys Apple Inc, American Express Co, Coinstar, Sells America Movil, Petrobras, Visa,” Forbes April 11, 2013.)
The chart of Apple below shows a bearish descending triangle. The $400.00 level is a key support level. Yet a good quarter could easily turn the tide and drive the share … Read More
When the Bears Go Running: How to Turn Short-Covering Into a Contrarian Opportunity
By George Leong for Investment Contrarians | Mar 15, 2013
Bearish traders tend to short stocks and/or the equities market. While stocks subject to short selling are viewed as negative, I often take the contrarian view, and look at these shorted stocks as a possible buying opportunity due to the short-covering possibility.
Let me explain. With short selling, a trader disliking a particular stock would short the stock by borrowing the stock from his or her broker and selling it in the market at the prevailing price. The short-seller hopes the stock falls in price. For the short-selling strategy to pan out, the short stock must drop in price so that the short-seller can buy it back at a lower price and replace the borrowed position to the registered holder. The short-seller would profit.
In my view, looking at heavy short-selling stocks is a strategy to buy a stock that could have more potential than what the short-seller thinks. By taking this contrarian short-selling approach, you can often discover stocks that may be set for a short-covering rally in which you can profit.
For instance, online leader Google Inc. (NASDAQ/GOOG) is trading at over $800.00; however, investors continue to like the stock, as there are minimal short-selling positions on the stock at 1.6% of the float, or 1.4 million shares, as of February 15, 2013. (Source: Thomson Financial, last accessed March 14, 2013.) But note that a month earlier, there were 3.28 million short shares on Google, so the stock attracted some short-selling covering that helped to drive the stock higher, based on my stock analysis.
I normally would not look at a stock like Google as a short-selling buying … Read More
Why Private Equity’s Right for Dell
By George Leong for Investment Contrarians | Feb 22, 2013
Michael Dell is no fool. After watching the declining demand for personal computers (PCs) and its disastrous impact on the PC makers, Mr. Dell had an idea: sell the company to private equity and let them try to convert Dell Inc. (NASDAQ/DELL) into a “mini IBM.”
The new Dell will be focused on serving the technology needs of large companies, which may include the possible divestiture of its struggling PC business. (Source: Gupta, P. and Damouni, N., “Dell to go private in landmark $24.4 billion deal,” Reuters, February 5, 2013.) A decade ago, International Business Machines Corporation (NYSE/IBM) followed a similar strategy after selling off its PC business to Lenovo Group Limited; so far, the move has been successful for IBM, according to my stock analysis.
The recent operating results from Dell suggest that its founder, Michael Dell, did the right thing. In the fiscal fourth-quarter earnings season, the company earned $0.30 per diluted share, down 31% year-over-year. Yet the red flag at Dell was an 11% decline in revenues. While the results narrowly beat the Thomson Financial consensus estimates, it’s clear that the PC business is dying, according to my stock analysis.
While the $24.0-billion deal is facing opposition from two major shareholders, Southeastern Asset Management and T. Rowe Price, that are both demanding more money, I really cannot see how this will happen. The results point to a company on the decline unless something is done; based on my stock analysis, there’s more of a chance of survival with private equity for Dell.
The strategy shift that is expected to take place is not a surprise, given the … Read More
Who Will Be the Long-Term Winner in the Smartphone Market?
By Sasha Cekerevac for Investment Contrarians | Feb 21, 2013
When it comes to creating an investment strategy, the crucial variable is determining where one believes corporate earnings will be in the future. Trying to determine what the future landscape will be, and not necessarily the current level of corporate earnings, is the real goal.
One of the strongest sectors in the global economy has been the growth of smartphones. The latest data from Gartner, Inc. (NYSE/IT), a leading technology research company, show that during the fourth quarter of 2012, smartphone sales reached 207.7 million units, up a staggering 38.3% from the same time period in 2011. (Source: “Gartner Says Worldwide Mobile Phone Sales Declined 1.7 Percent in 2012,” Gartner, Inc. web site, February 13, 2013, last accessed February 19, 2013.)
Even while much of the world’s economies are not growing at extremely robust levels, a solid investment strategy continues to be focused on smartphone products that are driving corporate earnings in that sector.
Gartner estimates that for 2013, smartphone sales will total nearly one billion units. This clearly shows that corporate earnings will continue to grow in the smartphone category for the near future, which leads me to look for an investment strategy that can take advantage of this information.
While many focus on the hardware manufacturers, I think the big winner over the next five to 10 years will be Google Inc. (NASDAQ/GOOG). Because Google has been able to develop its “Android” platform software to work on both high- and low-end smartphones, this opens up the entire world as a potential marketplace.
I don’t believe many parts of the world will pay the high price for some of … Read More
Google Isn’t as Expensive as You May Believe
By George Leong for Investment Contrarians | Feb 7, 2013
For all of you who are attracted by the battered price of Facebook, Inc. (NASDAQ/FB), I suggest you keep on reading: Google Inc. (NASDAQ/GOOG) is the top player in the Internet space, in spite of it hitting an all-time record high of $776.60 last Friday, and here’s why.
My stock analysis indicates that some of you may feel that, at nearly $800.00 a share, Google is valued at way too lofty a price. Moreover, some may be spooked by the recent collapse of Apple Inc. (NASDAQ/AAPL) on the price chart after trading at over $705.00 a share in September 2012. What I would say to you is that Google is not Apple, and it’s definitely a much better company than Facebook, based on my stock analysis.
In fact, I think Google has more of an opportunity to reach $1,000 than Apple. Of course, that is if Google doesn’t undergo a stock split. I recall when Google first debuted in August 2004 at $100.00 a share, when I was debating in my mind whether the stock was a highflier or the real thing. At that time, Internet stocks were really still in their infancy.
The stock chart for Google below shows the stock’s upward trending channel and strong relative strength. But you need to be careful, as the stock could decline back to the area defined by the blue circle between $715.00 and the current price. A retrenchment into this space could signal a buy, based on my technical analysis.
Knowing what I have learned over the past eight years, I wish I had picked up some shares of Google; but … Read More
The Pros Will Tell You When to Take Some Profits
By George Leong for Investment Contrarians | Feb 1, 2013
Apple Inc. (NASDAQ/AAPL) was trading at $705.07 on September 21, 2012, and there were talks of the tech giant becoming the first trillion-dollar company in the world. That was then. The stock has since made a steady decline down to below $500.00, hitting a low of $435.00 on January 25; it’s trying hard to hold on and instill investor confidence. The sell-off was driven largely by concerns of soft “iPhone 5” sales. My stock analysis suggests that the profit-taking in Apple shares is not a surprise, given the stock’s enormous run-up in share price and the fact that rivals are clawing at the door.
My stock analysis indicates that ownership by institutional investors shows a 0.76% net sale of Apple stock over the last quarter-to-quarter, representing 4.8 million net shares sold by institutions, according to information by Thomson Financial.
Even CEO Timothy Cook sold some of his shares in Apple during the run-up, as my stock analysis notes. On March 9, 2012, he sold 17,322 shares for $545.17 per share, followed by another 20,178 shares for $547.80–$551.51 each a few days later on March 11, 2012. Two weeks later, on March 25, Timothy Cook sold 106,640 shares for $595.96–$606.80 a share for a total $64.1 million, according to data from Thomson Financial. If he had waited until September, he could have got $705.00 per share sold. Perhaps Cook was a bit nervous of the stock’s rocketing share price and wanted to reap some of the rewards. Maybe Cook needed the $85.0 million he received from his sales to invest in something a bit less frothy than Apple stock.
In fact, … Read More
Why I’m Actually Excited for Today’s “BlackBerry 10” Release
By George Leong for Investment Contrarians | Jan 30, 2013
I can honestly say that I’m excited to see the introduction of the new and highly anticipated “BlackBerry 10” (BB10) operating system and products by Research In Motion Limited (NASDAQ/RIMM; TSX/RIM) today. The overall market also appears hyped up on the BB10 platform. Research In Motion (RIM) has surged 176% since trading at $6.43 on September 21, 2012, as traders speculate on the company.
My technical analysis shows a widening gap on the chart on January 22 on a bullish moving average convergence/divergence (MACD) indicator (marked by the circles in the chart below), which is bullish. But watch the overbought condition. Also, the emergence of a bullish golden cross as indicated on the chart was a strong buy signal.
My stock analysis suggests that RIM appears to be rising out from the ashes, as investors dive back into the once-fabled maker of the BlackBerry. For RIM, it has been quite the journey after the investment community, including myself, thought the end was near for this former Wall Street star. Since the emergence of Apple Inc. (NASDAQ/AAPL), the BlackBerry and “Playbook” tablet have proven to be horrible failures, based on my stock analysis.
Chart courtesy of www.StockCharts.com
Based on what I have already seen, from what’s been leaked out on the Internet, the new BlackBerry has the familiar rectangular shape and touch screen feature of many of the most popular smartphones out there. RIM has aligned with many of the big carriers to market this product. The company is also looking at licensing out its software, which would be a first for RIM. The strategy appears to be in place; now … Read More
Why America’s Destined to See Jobs Move Overseas
By George Leong for Investment Contrarians | Jan 29, 2013
I was reading that Apple Inc. (NASDAQ/AAPL) would produce at least one of its computer products in the United States. This is great news for jobseekers, but Apple will continue to manufacture the remainder of its products outside of the U.S. in low-cost global manufacturing regions, such as China, Asia, Mexico, Eastern Europe, and Latin America. The reality is that companies have to control costs, especially given the slower revenue growth amid corporate America.
The jobs numbers are not good. There are 22 million or so Americans looking for work who are unemployed or underemployed, with about 12 million being fully unemployed. These are not good jobs numbers, as many of these people are taking minimum-wage jobs just to fight off the creditors and put food on the table. The poor jobs numbers climate is also hindering the eurozone.
Jobs growth is showing signs of wanting to edge higher with the unemployment rate holding at 7.8% in December, with 155,000 workers managing to find full-time work, which was slightly ahead of Briefing.com’s estimate of 150,000.
The official unemployment rate is 7.8%, but I wonder about the validity of the jobs numbers as far as an accurate reflection of the nation’s jobs situation. My thoughts are that the unofficial unemployment rate is much higher than the reported rate. The official jobs numbers don’t include the millions of Americans that have dropped out of the labor force, tired of pounding the pavement to get shut out of jobs or working at minimum-wage jobs.
As I have said in this newsletter before, the millions of jobs that have vanished from the U.S. landscape … Read More
Why Apple Faces Strong Headwinds
By George Leong for Investment Contrarians | Jan 16, 2013
Have you seen the share price of Apple Inc. (NASDAQ/AAPL) lately? Since it traded at its record high of $705.07 on September 21, 2012, it has been a mess. Faced by rising competition, better products, and superior pricing, Apple has seen its price shaved by about 28.0% in what has been a trend reversal to the bearish side, according to my technical analysis. Apple is on the verge of breaking below $500.00, a move that was last encountered on February 16, 2012.
There are questions swirling around regarding the ability of CEO Timothy Cook to deliver the superlative revenue growth traders have been accustomed to in the past. The problem is with the rise of Samsung Electronics Co. Ltd. and Google Inc.’s (NASDAQ/GOOG) “Android”-based phones and tablets; the competitive environment has tightened, so Apple will need a “Plan B,” according to my stock analysis.
The slippage in Apple’s business is evident. Apple shipped 14.6% of the total smartphones shipped globally in the third quarter, versus 23.0% in first-quarter 2012, while Samsung’s shipments surged to 31.3% in the third quarter, according to International Data Corporation (IDC). (Source: “Apple Cuts Orders For iPhone Parts As Demand Slips,” Yahoo! Finance via Wall Street Journal,January 13, 2012.) The article also speculates that Apple is cutting its orders for parts used to build the “iPhone 5” due to lower demand.
Chart courtesy of www.StockCharts.com
In my view, Apple is in trouble, based on its global market share and declining revenue growth. According to analysts polled by Thomson Financial, Apple is estimated to grow its revenues by 22.2% in fiscal 2013, falling to a mere 15.1% … Read More
Should You Be Worried About Apple?
By George Leong for Investment Contrarians | Dec 19, 2012
What the heck is going on with Apple Inc. (NASDAQ/AAPL)? The stock has corrected 26% since trading at a record high of $705.00 on September 21, and based on my stock analysis, Apple has made a chart reversal in a bear market.
While the price chart shows two major downward moves, don’t panic yet, but be careful.
I still consider Apple one of the best stocks in technology, but the company is clearly facing increased competition in the lucrative tablet, mini-tablet, and smartphone markets. The stock was recently downgraded, but sales in China are encouraging after Apple launched its “iPhone 5” and saw over two million units sold from December 14–17. (Source: “iPhone 5 First Weekend Sales in China Top Two Million,” Yahoo! Finance via Business Wire, December 16, 2012.) The iPhone 5 will be sold in over 100 countries by year-end.
Its valuation is attractive at 9.04X its estimated fiscal 2014 earnings per share (EPS) consensus estimate of $57.83 per diluted share, according to Thomson Financial. Its price/earnings-to-growth (PEG) ratio of 0.5 is bargain-cheap, based on my stock analysis.
The chart is bearish, showing the stock’s recent break below the 50-day moving average (MA) of $578.67 and the move below the 200-day MA of $597.41, which represents a bearish “death cross,” based on my technical analysis.
Chart courtesy of www.StockCharts.com
My stock analysis is that there are clearly some concerns that Apple may not be able to continue on its merry way. Chief rival Samsung sold a staggering 97 million mobile phones in the third quarter, well above the 23 million iPhones sold by Apple, according to Gartner. (Source: … Read More
Rest in Peace, PC Market
By George Leong for Investment Contrarians | Aug 15, 2012
The verdict is in, and it doesn’t look good for the personal computer market. Dell Inc. (NASDAQ/DELL) knows this and so does Hewlett-Packard Company (NYSE/HPQ).
Sales of personal computers (PCs) in the U.S. plummeted by 11% year-over-year in the second quarter, according to International Data Corporation (IDC). The decline was six percent based on research by Gartner, Inc. (NYSE/IT), but this figure was based on sales of PCs and laptops. On a global basis, PC shipments fell 0.1% year-over-year, but the Gartner research indicated it was the seventh straight month of declines or slight increases. Based on my stock analysis, the PC is in deep trouble unless PC makers can re-invent the PC and laptop to challenge the tablet.
You can attribute the fall of the PC to the superlative rise in tablets, according to my stock analysis.
The global market for tablets is estimated to rise to around $31.9 billion this year with over 100 million units delivered, according to Visiongain. By 2016, it’s estimated that about 360 million tablets will be sold, according to IHS iSuppli. By comparison, global PC shipments are estimated at 528 million in 2016, according to IDC. In the U.S., PC sales came in at 71.3 million in 2011, down five percent year-over-year and the first decline since 2001.
Users want tablets, not hybrids or smaller-sized laptops. Hewlett-Packard had been in the tablet market, but left after feeling the death grip of Apple Inc. (NASDAQ/AAPL). Research In Motion Limited (NASDAQ/RIMM), previously viewed as a chief rival, has made numerous miscalculations with the constant delay of new products and a struggle to find itself, according … Read More
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