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Apple, Big Hedge Fund Stars & The Sell Side/Vaudeville Act To Burn Your Hard Earned Money As A Punchline That's Just Not Funny

Reggie Middleton's picture




 

I see many pundits on CNBC commenting on Apple. I believe they are ALL wrong! To begin with, nearly all of them are coming up with revaluations after the fact - which is simply too late and lacks credibility. Second, Apple has someserious steps to take if it is to get back into the mobile computing race. David Einhorn's recommendation to return cash to shareholders (on the CNBC front page today) is not one of them. He's approaching this from a trader's perspective, and not from the perspective of a strategic long term investor. To date, Apple has outperformed nearly all hedge funds in the reinvestment of its cash. If Apple does the right thing, the  ability to replicate this performance by only 50% will whip the pants off of nearly every hedge fund, Einhorn's included. In addition, Apple is about to go through a depression style bout of margin compression that it will need cash to battle. I explained this to a group of entrepeneurs last year. Basically, Apple's $137B+ in cash is a call option on future opportunities and a put option on future mishaps. Einhorn is asking management to sell that call/put option straddle now, and forgo the ability to capitalize on future opportunities while running naked against margin compression at the same time that Apple's competition has surpassed it in technical ability (product/service wise) while Apple has shown ineptitude in competing in the cloud (see the maps fiasco), the next battle ground for the end user. This option sale will be had for the one time premium of a cash distribution. Wise, eh?

Does this mentality smack of the short term-ism indicative of a trader to you, or is it the mentality of the long term, innovative vision of Steve Jobs that got Apple where it is now? See the video below where I delve into this in detail...

Since I was practically the only one (at least that I know of) to accurately and timely call the turn on Apple BEFORE THE FACT, I would love to take this time to point out what it is that's wrong with Apple and what it would take for it to regain its shine. Just to illustrate this point, let's reminisce, shall we...

Let's contrast this to what I have espoused over a similar time frame...

Now, what do we have in sell sidevaudville today? CNBC reports Apple Heading Toward $200?: McLean.WTF???? What happen to $1,000????

Yes, I'm going after the sell side again. And I'll keep doing it. I'm a monster to the charlatan crew... A monster, I tell you...

Apple needs to start spending money, needs to spend wisely, needs to spend it in droves, and it needs to do ALL of this, NOW!!!! That is what Apple REALLY needs to do to compete with Google and enrich shareholders. Now, those shareholders with short term-ism will consider this Apple management burning cash in a desperate attempt to save the ship. These limited horizon guys will jump ship and drive the share price down. It is then that Apple will be a strong buy if, and only if, management succeeds in making leeway... Much in the same way that Google did in its acquisition spree that gave it some of its most valuable properties and multi-billion dollar franchises that literally run the web in their respective categories - to wit:

  • YouTube
  • Android
  • Google Voice
  • AdMob

For anyone who thinks this acquisition spree is a foolish endeavor, ask those who listened to the "short Google, long Apple" advice of the pros...

image001image001

Just as much (if not most, not withstanding the "Muppet Factor") of the Sell Side of Wall Street Doesn't Truly Understand Apple, many of them equally clueless regarding Google as well… Google has used it's call option of billions of dollars of cash and its cash producing cash cow business model of ad serving to literally buy value at discounted prices. Of course, those with short term vision can't see the value - just as fails to see a forest due to all of that tree bark in the way!!!

Google Final Report Sep 29 Page 53 copyGoogle Final Report Sep 29 Page 53 copyGoogle Final Report Sep 29 Page 54Google Final Report Sep 29 Page 54As a reminder, I warned in plenty of time to both avoid loss and profit on the short and long side for each company involved in these mobile computing wars. As a matter of fact, three years ago, I laid out in detail the entire mobile computing war map - along with the prospects of the major competitors - Google, Apple, Research in Motion and Microsoft/Nokia, reference "The Mobile Computing Wars" series. How accurate were these predictions, predilections, and analyses?

Now, for all of you senstive types who may consider this bragging or boasting, it is far from such. As a matter of distinct fact, the contents of this entire post should have been glaringly obvious to anyone years ago who actively used and followed the products and services of the companies herein, and had even a rudimentary understanding of business valuation. You know, it's amazing how far an awareness of cognitive biases (Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All) and a mastery of second grade math () can get you on Wall Street.

The Sell Side analytical community and the (sheeple) investors which they serve is another matter though. Subscribers can download the data that shows the blatant game being played between Apple and the Sell Side here: File Icon Apple Earnings Guidance Analysis. Those who need to subscribe can do so here.

Below, I drilled down on the date and used a percentage difference view to illustrate the improvement in P/E stemming from the earnings beats.

Again, a master of the basics, the fundamentals, common sense and 2nd grade math can actually bring you tomorrows news yesterday! For those interested in the research behind these many calls, as well as many others,Subscribe to BoomBustBlog today!

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Fri, 02/08/2013 - 01:12 | 3225213 847328_3527
847328_3527's picture

Keep up the good work Reggie!

Fri, 02/08/2013 - 00:27 | 3225149 RECISION
RECISION's picture

 It is then that Apple will be a strong buy if, and only if, management succeeds in making leeway... 

Leeway...  mmmm....

Are you sure you know what leeway means Reggie...???

Thu, 02/07/2013 - 19:24 | 3224499 falak pema
falak pema's picture

so Reggie when do the french banks tank as you promised, thanks to their liquidity asymmetry, as predicited and demonstrated by you back in 2011; as  the inevitable truth of the "mark to market" meme?

Fri, 02/08/2013 - 07:38 | 3225373 negative rates
negative rates's picture

That would around 015, but 3 months later they make a resurrgence, so place your bets accordingly.

Thu, 02/07/2013 - 19:32 | 3224513 Spastica Rex
Spastica Rex's picture

Oracles are a dime a dozen.

Fri, 02/08/2013 - 00:13 | 3225125 willwork4food
willwork4food's picture

Really? Here's one: The DJA will do another '08 crash in the next few days starting Friday...then another '08 rebound. The new normal.

If anyone made some mad money, I accept pay-pal donations. Thx.

Thu, 02/07/2013 - 18:16 | 3224345 Spastica Rex
Spastica Rex's picture

Doesn't Apple just become the next (slightly lamer) Microsoft? Isn't that the safe bet?

Thu, 02/07/2013 - 18:04 | 3224290 moonstears
moonstears's picture

When's my FB coming back(need $39), or, when do miners run, Reggie? Time this right and I'll buy the damned newsletter!

Thu, 02/07/2013 - 17:16 | 3224180 BurningFuld
BurningFuld's picture

Blackberry Bitchez!

Thu, 02/07/2013 - 16:39 | 3224036 NotApplicable
NotApplicable's picture

Reggie, why do even talk about such non-entities as a "strategic long term investor?"

Something, something FOREST. Something, something TREES.

All you're doing is aiding and abetting the crime in progress. If you believe stock prices have to have any connection to reality, well... you'd be advised to understand what the reality really is.

As always, as long as you hold wealth within their system, it's not really yours, but theirs to do with as they wish.

You gonna get Corzined, Mr. Suicidal-Stock-Picker!

Thu, 02/07/2013 - 16:11 | 3223939 jimijon
jimijon's picture

Reggie has been shorting Apple since 2010 in the short-term it's time to go long and play fill the gap

Cheers

Meanwhile for real fun;
Mjna, hemp, phot, grnh

Thu, 02/07/2013 - 15:48 | 3223875 hannah
hannah's picture

"Since I was practically the only one (at least that I know of) to accurately and timely call the turn on Apple BEFORE THE FACT,...."

 

WRONG...!... cramer called the exact top...exact.look it up....the problem is he said BUY BUY BUY...but it was the exact top.

Thu, 02/07/2013 - 14:24 | 3223564 Grand Supercycle
Grand Supercycle's picture

Wile E. Coyote sell off awaits...

SP500 daily chart choppy downtrend commencing.

Longs please be careful.

http://trader618.com

Thu, 02/07/2013 - 13:49 | 3223433 Stonecold
Stonecold's picture

Why alwasy so negative Reggie.  Don't get me worng I respect yout views. 

Thu, 02/07/2013 - 14:00 | 3223464 Reggie Middleton
Reggie Middleton's picture

It's not negative nor positive. It's the TRUTH!!!

Thu, 02/07/2013 - 20:46 | 3224687 e1618978
e1618978's picture

At what stock price did you start going short? 2012 must have been painful.

Thu, 02/07/2013 - 20:05 | 3224588 Stonecold
Stonecold's picture

Don't be a hater.  I was not haten on you. 

Thu, 02/07/2013 - 15:21 | 3223774 mogga71
mogga71's picture

'Since I was practically the only one (at least that I know of) to accurately and timely call the turn on Apple BEFORE THE FACT"

 

Reggie ... if memory serves me correctly you were calling Apple as 'over bought' back in 2011.  I am not sure timely call is quite appropriate....it was only a matter of time when you would be right.  Reading this article you would have thought that Apple were finished in the mobile market....not mentioning the fact that it was the 5th best quarter results in history and the reason the stock price tanked was a) it WAS overbought and b) the analysts expectations were too optimistic.

When Apple hits 500 again are you going to make a blog entry that you may have been wrong.... I doubt it ..... I would wager that it will hit 500 and possibly 600 again ... then tank again .... and you will be back saying told you so.  A lot of people are making a great deal from Apple trading and its not the general public.....its all an effin game.

 


Fri, 02/08/2013 - 07:35 | 3225372 negative rates
negative rates's picture

Careful now, you might drive him to drink.

Thu, 02/07/2013 - 16:30 | 3223997 tango
tango's picture

Actually his analysis was more about Google's ascendency than Apple's demise. Google has emerges as the CLEAR winner,wiping the floor with the rest of the pack. Just saw him on CNBC getting kudos for winning the annual stock picks (over a slew of "experts").  His research remains spot on.  I finally understand that he calls trends and not immediate buys and sells.  Maybe it's because I've benefitted from his advice (long leaps) that I'm more disposed to Reggie.  

Thu, 02/07/2013 - 17:26 | 3224211 Cheesy Bastard
Cheesy Bastard's picture

This is true.   You will win more than lose if you follow his advice.  I loves me some Reggie.

Thu, 02/07/2013 - 15:31 | 3223817 jcaz
jcaz's picture

Shhh- this isn't about getting the Apple call right or wrong- it's about pimping an overpriced newsletter....

I declare here and now that Apple will go up sometime in the future... And it will also go down- write this date in history down....

Do NOT follow this link or you will be banned from the site!