The incredible multi-year iPhone run across the globe has ended. Apple’s earnings report and conference call make the conclusion unmistakable. My conviction was so strong that I did not hesitate from penning a column explaining the fundamentals behind the conclusion.
It is true that Apple AAPL makes many products other than iPhones. However, from an investment perspective, everything else pales in comparison to them. The reason is that Apple derives about three quarters of its profits from iPhones, and iPhones have been the main growth engine.
The question for investors and short-term traders alike is how to trade or invest in Apple now.
Let’s start with an annotated chart of Apple.
Click here to see an annotated chart of Apple.
There are two scales shown on the right-hand Y axis. The first scale is Apple’s stock price. The second scale is a percentage scale that compares the Nasdaq 100, represented by the PowerShares QQQ Trust Series 1 ETF QQQ with Apple. The zero on the percentage scale roughly coincides with the low in Apple stock around $390, and the zone in 2011 that launched Apple stock into a parabolic move.
First observe that since the beginning of the period shown on the chart, Apple has moved up about 30% whereas the QQQ has moved up about 55%. The point is that during the super-growth phase of iPhone and the advent of iPad, when all is said and done, an investment in QQQ produced a much higher return than an investment in Apple. Second, as the chart shows, an investment in QQQ would have had a lot less volatility than an investment in Apple…Read more at MarketWatch
