Apple 2.0

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Why is Apple headed down again? Here's one theory

December 5, 2012: 10:45 AM ET

The third selling wave since Sept. 21 could be the bursting of a special dividend bubble

chart_ws_stock_appleinc_2012125171646_galleryvFORTUNE -- For Apple (AAPL) investors wondering why the company has been, as Economic Timing's Jason Schwarz puts it, "in sell-off mode for over two months, even in the midst of its greatest quarter of sales in history," Schwarz offers an explanation.

He believes the current wave of selling is linked to the co-called special dividends that hundreds of companies from Costco (COST) to Walmart (WMT) have issued in recent weeks.

"Apple's refusal to issue a special dividend," Schwarz wrote Tuesday in post to subscribers (reposted on Seeking Alpha), "is causing a third wave of its sell-off that began on September 21st.

"The first wave was caused by institutional re-balancing due to Apple's 74.9% YTD returns, the second wave was caused by the hangover effect of President Obama's re-election and the third wave is being caused by special dividend posturing as funds sell Apple in order to gain exposure to the dividend bubble.

"This new variable is what caused Apple to deviate from its weekly pattern on Friday. As soon as funds became convinced that Tim Cook wasn't going to participate, they began transitioning out of Apple for the short run."

Schwarz is advising investors whose patience with the stock hasn't yet worn thin to keep buying the dips. "This dividend bubble will likely enhance Apple's next rally," he writes. "But we'll need to endure another dip before it takes off."

His post is titled Apple's Unintended Consequences Of The Special Dividend Bubble.

See also: Deutsche Bank: Apple special dividend 'welcome but unlikely'

UPDATE: Munster: Four more reasons Apple got clobbered on Wednesday

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for

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