Thursday, February 16, 2012

Apple of my eye

Think couple of months back when Apple was on the verge of several downgrades with analysts saying that Apple is losing its touch. This was all after disappointing Q3 results. Last time I recommended Apple it was trading near 370. As I speculated then a lot of customers delayed their purchase of iPhones due to the new model that was released in Q4. Not to mention Christmas that has always been good for Apple. Surprise-surprise - Apple delivered big time and announced their biggest earnings in history surpassing all expectations.

Since this is all known and it is easy to be smart backwards I will focus on something different in this post - the role of expectations.

When awaiting Q3 results investors expected Apple to deliver according to previous growth trend. They didn't take into account the importance of the new model 4S before Christmas. When awaiting for Q4 results are expectations were down due to disappointing Q3 results so expectations were greatly surpassed. Here's a food for your thought: what kind of results do you expect Apple will deliver for their Q1 this year? Here's another question - what kind of results is being expected by the market?

I have always been a fan of buying shares of companies that nobody expects nothing of. I have unfortunately done my worst trading with companies that everybody expects a lot of. Apple for me will position in the latter category if their share price stays the same prior to Q1 earnings. Everybody expect Apple to deliver equivalently supreme results in the current quarter. While I'm certain that Apple will be a great investment for the next two years I'm also speculating that we have gotten a bit ahead of ourselves and bought the share price up too quickly.

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