Watch As 202 Hedge Funds Follow The Bouncing Apple, Till They Don't!!!

Reggie Middleton's picture

Apple has started exhibiting the behavior that I have been warning about, dropping four and five percent over the last 24 hours or so, then regaining a third of the same.


This volatility should be of no suprise. If you look at the chart above, you will clearly and unequivocally see Apple (or AppleDAQ or NASDApple - regardless of the nomenclature) is essentially the NASDAQ, as was pointed out in previous posts from BoomBustBlog, ex. When The Most Contrarian Trade Of The Year Is No Longer Contrarian, It's About That Time - Enter The Rotten Apple and that of ZH Apple Responsible For 90% Of Intraday NASDAPPLE Gain - to wit:

Or perhaps the 209 hedgies who rely on this stock for their year will play prisoner's dilemma (and free ride) one too many times and dismiss their recency bias to remember that the first one to migrate wins when prices go vertical.


Again, as pointed out in When The Most Contrarian Trade Of The Year Is No Longer Contrarian, It's About That Time,  this process of Apple purging may have already started...


This interesting observation was brought up up in my Twitter feed, to wit:

# of funds in this order (%) since 12/2010: +1.4%, -4.0%, +8.7%, +4.3%, +5.4%, +3.2%, -25.8% (1st big drop) 

@PierreLeroux28 @ReggieMiddleton I just find it interesting (if the data is accurate) that more than 1,000 funds sold out during rise 

PierreLeroux28 Pierre Leroux So if institutions dump some $AAPL on strenght after that THEY ALSO BUY THE DIPS Like i will rebuy my 10 calls 

Of course the lovefest with Apple dictates the BTD will reign, but suppose the dips are accompanied  - better yet caused - by widespread use of technologies known as calculators, spreadsheets or BoomBustBlog subscriptions?

Correction, courtesy of @cperruna, author of the chart above: 

The MarketSmith chart I uploaded was not correct but I have revised my feed with the correct data. I actually questioned MarketSmith when I saw a large drop in another leader I have been tracking. In any event, the updated data is as follows, as I posted on my twitter feed:

"Although Institutional #'s were incorrect, $AAPL still down 8% from 4/7 chart| sponsorship is now 4,196 from 4,308"

This isn't just about quantitative analytics uber blind hedgefund managers reaching for cap gains. There are very fundamental reasons for Apple owners to expect a pullback or slowing of growth. After all, that margin compression theory is ready to come into its own. We have created a very realistic scenario analysis that shows what could happen, and when, and topped it off with what we feel should happen. Interesting indeed! Subscribers, reference the Apple Margin & Valuation Note. I gave free readers an example of the evidence we uncovered showing Apple already experiencing margin compression and a loss of market share in one of its flagship products (Apple's iPad Is Losing Market Share And …).

If the biz class 101 rules ring true, this could very ugly very fast... The Company had a slam bang quarter last, but much of that is essentially unrepeatable in the near term, reference Anecdotal Observations On Apple's Recent Quarter.




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No-1-U-Know's picture

On August 3rd 2010, you started warning that Apple is vulnerable to margin compression (

Gross margin then stood at around 37% and the stock traded at $262.

Today, GM is approaching 45% and the stock trades at $587.

After all, that margin compression theory is ready to come into its own.

Over 20 months (and 325 points) later, are you sure it's finally ready?

Zero Govt's picture

the real margin compression is on at Goonbubble... a 12% drop in revenue per click

Reggie was just going to mention it, give him 10 minutes while he puts on his clown outfit

dbest180's picture

Y'all are not looking long term when bashing Reggie. Apple will be top dog for tablets and phone for years to come. But don't rely on that meaning their stock will remain top for long. Market share news does wonders to a stock price. 

exartizo's picture

Good post Reggie

Now if we can just get the rest of the ZH'ers to buy the AAPL long dated OTM puts like I did.

They're up 87.32% as of close of business today.


I am a Man I am Forty's picture

your iPad market share chart is misleading and I will leave it to you to tell your readers why, and iPad's market share is 70%........forget it, I will do it, if a market increases 10 fold and apple loses percentage market share it doesn't matter, why don't you post iPad unit sales charts, which is what actually matters to Apple.

Apple is up 200% since you've been bashing it, comes down 9% off its all time highs and your ready to do a touchdown dance.

You do realize hedge funds can buy a stock too when they think it is cheap too right? it's not exit only.

I am a Man I am Forty's picture

And Reggie, any time you post all of your analysis, at least post net income growth over time, because let's face it, that is all that really matters.  And then post a timeline for when you've been warning, making incorrect calls, etc. against the stock price.  And also post your iPhone unit sales forecast charts vs actual unit sales charts, all the really important stuff seems to be missing.  

Because I know you want to fully inform your readers so they can make the right decision.  ZH and RM love to guess when everyone is going to run for the exits, many hauled ass in the high 300's.  And many are selling every single day.  It's what you call daily volume.

And TD has been posting about this for a year now, get some original material.




Dburn's picture

For Reggie , disecting Apple is like picking your nose; once you get started you just can't stop.

I do like the volatility and so does my Roth. :-)

Zero Govt's picture

i hear a Google founder wants to turn his giant diseased dinosaur into "behaving like a small business" ..any thoughts on your beloved wheezing nag losing some weight Reggie?

a WSJ journo quipped would it be possible for Goofy to jettison their corporate jets and all the free lunches at Googles HQ (Goo staff are getting a bit tubby with all the free chummy)

I'm far less worried about Apples cool precision-guided achievements than Goonbubbles copy cat 'me-too' also-ran spoiler campaign

Goonbubbles founders squeeking about 'acting like a small business' while invading everyones laptops and internet privacy and power grabbing back their shares doesn't exactly smack of a small biz culture, more confused corporate meglomania..

...does it Rampaging 'Fiery Sword of Truth' Reggie?

Is their electric car Tesla (turkey?) bankrupt yet ...that was a small venture

hotkarlandtheclevelandsteamers's picture

A 50% drop and the stock will be around $290 still above where you began warning.  What do they have about $110 per cash on the balance sheet now.

Pladizow's picture

He who panics first!