AAPL

[Todd]

I can count on one hand the number of investors I've met or read about who have beaten the market over my time horizon.  (This excludes people who make their fortunes based on being heavily invested in one stock - eg, Bill Gates.  Someone please tell me what stock to buy that will do that.)  You can do your level best to convince yourself you can beat the market over the long term, but that's nothing but hubris.

[drogulus]

   
     It depends on what you mean by beat. I don't pick winners, I just pick stocks that do well. All you need to do is cut the percentage of losers, and by restricting yourself to long term dividend payers you do that automatically. In that sense beating the market is easy and common. It had better be, since I don't know much about the stock market. I do pay attention to the experience of other investors, though. If you buy stocks that pay you to own them, and you choose from among stocks with a record of doing that, you will "beat the market" by owning it. Get rid of the bad and the good wins.

    This is some of my stuff:

   

     J.C. Penny? Yikes! That one is going to go.

[Todd]

It depends on what you mean by beat.

No it doesn't.

[drogulus]

     The best way is to stop trying to "beat the market" and choose a practical goal. Like most dividend growth investors I have no interest in abstract goals, and that makes it easier to do better than people who think they can trade their way to riches. If you accumulate stocks that pay and reinvest the dividends you will do very well, and let the market worry about beating you.

[drogulus]

     I've learned a great deal in the last few months from Seeking Alpha, a website devoted to investment practice (and theory to some extent). There are all kinds of approaches, so if you have gold bug tendencies there are writers you can follow on gold and precious metals. Some writers tout ETFs, others cover the bond scene. I spend most of my time at the "Dividends and Income" tab, which apparently is gaining in popularity, probably due to the prolonged low interest rate environment. Anyway the site is a treasure and a natural step up from Motley Fool or other entry level sites. I still go to the Fool occasionally.

     Other useful sites include CEFConnect, all about the wild and wacky world of closed end funds. Their fund screener is quite useful.

[cwarchc]

rather than Apple, how about buying an orange, or a pineapple?

[drogulus]

     Bought at 606.63, now 680.00 up 12.11%.

     I'm just thinking out loud, but is this a good time to sell?

     Pro:  Improved iPhones won't keep AAPL from following a normalized trajectory IOW slower growth, law of large numbers and so on. Unsustainable trends are unsustained, so sell while the selling is good. Leaving profits on the table doesn't bother me much. The main thing is protect gains which are at the point of slowing down. Act now or regret it.

     Con: No, the price targets are good ($800 low, >$1000 a reasonable high), and an AAPL slowdown, which is coming to be sure, will precede not follow the peak. Enthusiastic fanboy buyers will prop up the stock for awhile until the Wile E Coyote moment we're all waiting for.

     Probabilistic mumbo jumbo: The odds for Sell are 20%, for Hold are 80%. Applying the proper weighting leaves me close to 50-50, that is a 1 in 5 chance that the peak is near is as strong a Sell signal as a 4 in 5 chance that AAPL will hit target range is a Hold.

[drogulus]

     To:    Ben "Sikorsky" Bernanke, Pontifex Maximus

     From: Drogulus, grateful insect

     Your Singularity-ness,

     Yeeaahhh Biatch!! You go, Baybee!!

     

[drogulus]

     Bought at 606.63, now 691.28, gain 13.97%.

     Stocks and indexes tend to stall at magic numbers, which in themselves are meaningless but act as triggers for sellers taking profits. So a stall and dip around 700 can be expected.

     I've decided to go for the target, which I'll set at 800. At that point, the move should be to sell half and set the next target, to be determined later.

[drogulus]

     Bought at 606.63, now 457.00, gain -24.67%

     

     Well, isn't this fun? I'm afraid I can't talk myself into buying more AAPL to cancel the loss with the gain as it goes back up. The logic is deficient. Why would AAPL be more likely to go up than any other stock? OK, it's more likely, I see that, the current price is not "sustainable" as the deficit nuts say. But any beaten down stock selling at a discount would do just as well, and as it happens I'm fully invested in those stocks now. So there's nothing for me to do.

     That leaves the question of selling AAPL at the right moment, and what the right moment is. First, I've concluded that AAPL has indeed passed from the fast growth insurgent phase to the slower growth phase where instead of breaking out into blue sky by creating product categories they're now competing with new products against rivals. The market is huge and growing, but AAPL has no advantages at this point that can't be taken away. They are not creating markets, they are selling into them on roughly equal terms.

     Therefore I've decided that while AAPL might make one last run up to $600 and even higher there is less compelling evidence that it will do so, even with an improved economy at its back. A good target IMO would be $550. If it gets there fast I might reset to $600.

     Now, what do I replace AAPL with in my IRAs? I have my eye on a few stocks. One is KMR.