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If the Apple falls, does the Earth rise up to meet it?

September 19, 2013

Drama. If the Apple falls, does the Earth rise up to meet it? Yes, it does. That’s Newton’s Third Law. In the context of the Apple Incorporated, we’re certainly minded of Newton’s Third Law because of its really, really, die-hard enthusiasts (The Street, September 17, 2013, Media Is Lying to You About Apple), but as investors we need to think about the Blackberry, the Cabbage Patch Kids, Barbie, and the Beanie Babies, and consider concepts such as “Fifteen Minutes of Fame” (Andy Warhol, 1968) and the more likely benefits of owning portfolios of likeable stocks, rather than just one at $400 per share.

Is it over?

Is it over?

However, if we think about amending Newton’s Third Law to “For every action, there is a reaction [that is equal and opposite]” (omitting only the words in [square brackets]), then we have a law that is sufficiently vague to help us with stock market investing.

It encourages us to be more circumspect about the “sure thing”, the “thing” that everybody knows. Or, doesn’t know, we think, such as the tree that nobody heard falling in the forest.

With that in mind, we re-visited Apple again, respecting its new dividend policy, its failures, and the rebounds, and we give you hope, but it still might be some time before we buy it again.

The company expects to pay $11 billion in dividends to its shareholders this year for a current yield of 2.5%, which is more money than the market value of such industrial stalwarts as the Campbell Soup Company, the Clorox Company, Burger King Worldwide, and two hundred other companies that we could mention in the S&P 500 NYSE.

Bishop-George Berkeley Yes.

Bishop George Berkeley
Yes.

On the other hand, our estimate of the demonstrated downside in the stock price volatility is as much as minus (-$80) per share per quarter so that we would not be surprised by any price between the current $470 and $390 to $550 for a possible 15% loss that would wipe out our expected dividend and lop off about $70 billion from the market value of the company, or all of the entire market value of each of all but 65 of the companies currently in the S&P 500 NYSE.

Exhibit 1: (B)(N) AAPL Apple Incorporated – Risk Price Chart

(B)(N) AAPL Apple Incorporated - September 2013

(B)(N) AAPL Apple Incorporated – September 2013

Apple Incorporated designs, manufactures, and markets personal computers, mobile communication devices, media devices and portable digital music and video players and sells a variety of related software, services, peripherals, and networking solutions.

(Please Click on the Chart to make it larger if required.)

From the Company: Apple Incorporated, together with subsidiaries, designs, manufactures, and markets mobile communication and media devices, personal computing products, and portable digital music players worldwide. Its products and services include iPhone, a handheld product that combines a mobile phone, an iPod, and an Internet communications device; iPad, a multi-purpose mobile device; desktop computers, such as iMac, Mac Pro, and Mac mini; portable computers, including MacBook Pro and MacBook Air; a line of iPod portable digital music and media players; and iCloud, a cloud service. The company also offers a range of software products, including iOS and OS X operating system software; server software; iLife and iWork application software; and other application software consisting of Final Cut Pro, Logic Studio, Logic Pro, and its FileMaker Pro database software. It also manufactures the Apple LED Cinema Display and Thunderbolt Display; sells a variety of Apple-branded and third-party Mac-compatible and iOS-compatible peripheral products, including printers, storage devices, computer memory, digital video and still cameras, and various other computing products and supplies; and Apple TV, a device that allows customers to watch movies and television shows on their high definition televisions. The company sells its products to consumers; small and mid-sized businesses; and education, enterprise, and government customers through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. It also sells and delivers digital content and applications through the iTunes Store, App Store, iBookstore, and Mac App Store. As of September 29, 2012, the company had 250 stores in the United States and 140 stores internationally. Apple Incorporated was founded in 1977, has 73,000 employees, and is headquartered in Cupertino, California.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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