The Blog That Could Have Saved That Investment Bank - Or - Beware Of Those Poison Apples!!!
In the post After My Contrarian Calling Apple's 3rd Miss Accurately, I Release My Apple Research Track Record For 2 1/2 Years, I came clean with the historical performance of my Apple research. Of course, many a hater had their hearts crushed as math and common sense once again ruled the day. Still, we see herd mentality and brand loyalty effect even those who're really supposed to know what they're doing - to wit: Rochdale Trader Made Unauthorized Purchases Of As Much As $1 Billion In Apple Stock Last Month
It's unclear when the unauthorized stock purchases took place, but shares of Apple have dropped around 11.5% since Oct. 1.
Stamford, Connecticut-based Rochdale, which employs noted bank analyst Dick Bove, is looking for a possible deal to recapitalize such as a capital injection or a merger, Bloomberg reports citing sources familiar.
Well, it's obvious the brokerage didn't buy that trader a subscription to BoomBustBlog. I've been following Apple for roughly two years now and have been one of the (if not the) most accurate fundamental pundits on said matter, with my valuations hugging Apple's share price rather tightly for the entire time I have followed it.
Reference Apple - Competition and Cost Structure 05/16/2011, which is now available for download to all due to its dated nature - even those who do not subscribe. Please note that this report only includes base case scenarios, while the latter reports included base, optimistic and pessimistic scenarios - which is much more realistic. Although some of the later reports are also stale-dated, they contain valuable knowledge that I'm not prepared to release to the public for free at this time.
A subscriber convinced me to post the 1st quarter's valuation bands (subscribers, see Apple Margin & Valuation Note 03/15/2012) for Apple to squelch the comments of those who are guessing what's behind the firewall. Our base case scenario was right on target, and during the target and after the earnings release I realized that we underestimated international (especially Asian) sell though and shifted the weight towards the optimistic band which also proved fairly accurate. As all can notice, the pessimistic band is not shown, and that is where the value lies here. I am now shifting my bias towards (that's towards, not to) the pessimistic band, for I feel Apple has now started to feel the competitive and margin pressures that I warned of, and has done so right at the deadline that I gave in 2010 (this is just as much a factor of luck as it is skill, alas, if it bears fruit it bears fruit). The latest valuation bands can be accessed by paying subscribers below (click here to subscribe):
Just to make this perfectly clear, I've been stating that Apple had margin compression stemming from extreme competition coming for two years now. That does not mean that Apple will collapse. As a matter of fact, I've included my stale Apple reports and a graph that shows I've pretty much been on target with Apple's share price the whole while. And for those who are so concerned with timing, I've highlighted in bold font where I've told subscribers to turn pessimistic on Apple's share price. This was October, roughly 12% ago in share price and many tens of billions of dollars in market value.
Keep the following in mind as you peruse this post...
I discussed this in detail with Lauren Lyster on Capital Account. The margin discussion started at 7:55.
For those who haven't heard my description of Apple's arch competitor, Google's, business model, look here:
See Right On Time, My Prediction Of Apple Margin Compression 8 Quarters From My CNBC Warning Landed Right On The Money! for more on the mechanics of the margin compression theory for Apple.
The latest Apple valuation bands (including the advanced pessimistic bands) can be accessed by paying subscribers below (click #0033cc;">here to subscribe):