Steve Schwarz

Riding the AAPL slingshot

October 15, 2011: 7:35 AM ET

Apple, as hedge fund managers are well aware, is one stock that always bounces back

It's hard not to be cynical about Wall Street when you see a chart like the one at right, which traces Apple's (AAPL) share price over the past four weeks.

It not terribly surprising that the stock has shot up nearly 20% in the past two weeks to close at an all-time high Friday of $422. The iPhone 4S is selling briskly and the company is expected to report record earnings on Tuesday.

What's harder to rationalize is why it fell more than 16% in the two weeks before that to hit an intraday low of $354.24 -- the day the iPhone 4S was unveiled and the day before Steve Jobs died.

I'm reminded in times like these of Jason Schwarz's Apple: Seven Reasons Shorts Love It, first published in 2009. The meat of it can be boiled down to two sentences:

"If you can keep a good stock down 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."

Schwarz, who publishes a popular investment newsletter, is no Zuccotti Park protestor. He's a Wall Street insider who knows something about how the game is played.

You can read the full text of his thesis 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 published in 2009. Except for some of the pre-iPad details and the last point, about Steve Jobs, it rings as true today as it did two years ago.


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