Apple, as hedge fund managers are well aware, is one stock that always bounces back
Whenever I see a chart like the one at right, which traces the trajectory of Apple's (AAPL) share price over the past 36 days, I'm reminded of Jason Schwarz's "Apple: Seven Reasons Shorts Love It," a supremely cynical view of the stock market that may be the best thing The Street published in all of 2009. The nut of his thesis can be boiled down to two sentences:
"If you can keep a good stock down," Schwarz wrote, "then you are able to load up for the ride back up. It's like a slingshot -- the harder you pull, the more propulsion you generate."
Ordinary retail investors who put their savings into Apple because they believed in the company's fundamentals would do well to bear Schwarz's words in mind when the stock behaves as it did in the first 20 days of June, dropping more than $32 (9.3%) despite sales, earnings and a balance sheet that is the envy of the tech world.
Apple, as Schwarz reminds us, is the favorite punching bag of the hedge funds and institutions that control more than 70% of its shares. It's a pretty good bet that the earnings Apple is scheduled to report in less than two weeks will set new records, and savvy fund managers know this. If they were dumping the stock in early June, it's only because they were planning to snap it back up in advance of Apple's July 19th earnings report.
Schwarz explained all this in his Dec. 19, 2009 piece. You can read it here. If you don't want to click through The Street's version -- posted in seven slow-loading gallery pages -- you can read, below the fold, the executive summary we posted on Dec. 20.
|Make $30 an hour, no bachelor's degree required|
|McDonald's gives Charles Ramsey free food for a year|
|Why doesn't Apple cut its prices and sell more iPhones?|
|The 'chicken poop' credit and other bad tax breaks|
|Where your donation dollars go|