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Apple's surging valuation distorting stock market indexes

post #1 of 42
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The rapid escalation of Apple's profits and corporate valuation are overshadowing the performance of other companies so much that analysts are highlighting how different the market would look like without Apple.

In an attempt to provide a clearer picture of American corporate earnings, a report by the Wall Street Journal notes that UBS analyst Jonathan Golub has published two versions of his quarterly earnings picture for the S&P 500, one including Apple, and one without.

The contrast highlights how much Apple contributed to the index's 6.6 percent year over year increase in the winter quarter; without the company, the gain drops to just 2.8 percent. With Apple, the S&P 500's profit margins were up 0.05 percent; without they were down 0.22 percent.




Golub wrote, that "by stripping away that one single company, it is like seeing light through a prism—you see things more clearly."

The report cited analyst Barry Knapp of Barclays Capital as saying, "what's happening with Apple is real, because Apple's earnings are real and any wealth accruing to Apple gets into the hands of U.S. shareholders. But to actually be able to look at trends and look at what's happening to [other companies], not just the one that's so exceptional, it is important to strip Apple out."

Were Apple in the Dow Jones Industrial Average

Alternatively, blogger Adam Nash of Greylock Partners notes that, had Apple been added to the Dow Jones Industrial Average rather than Cisco back in the summer of 2009 when the DJIA was last redefined, the Dow would be up over 2,000 points.

Nash noted on Monday that Dow closed at 12,874.04, and had it included Apple rather than Cisco, it would instead be at 14,926.95, 800 points higher than its peak set in April 2008.

"Can you imagine what the daily financial news of this country would be if every day the Dow Jones was hitting an all-time high? How would it change the tone of our politics? Would we all be counting the moments to Dow 15,000?" Nash wrote.

"Look, I’m just going to say it. The Dow Jones Industrial Average is ridiculous," he observed, adding, "You may not realize this, but the Dow Jones Industrial Average, the “Dow” that everyone quotes as representative of the US stock market, and sometimes even a barometer of the US economy, is a mathematical farce."

[ View article on AppleInsider ]
post #2 of 42
Quote:
Originally Posted by AppleInsider View Post

The rapid escalation of Apple's profits and corporate valuation are overshadowing the performance of other companies so much that analysts are highlighting how different the market would look like without Apple.



This shit is surreal.
post #3 of 42
Well, that's it! I finally made my move and I opened a trading account today.

In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.

From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.
post #4 of 42
This has been discussed in some financial circles when the question is posed "Why isn't Apple in the Dow Jones Industrial Average", in other words the top 30 stocks traded. Apple certainly falls into that category as the world's most valuable company. The problem is that Apple's growth has been so ridiculously out of what is normal for a big cap stock that apparently there wasn't a way to add Apple to the index and keep from radically distorting it. In other words, Apple's success isn't the same as all the other companies...its moving much faster than the rest of the economy and it would seem like the Dow was far better than the rest of the economy.
post #5 of 42
I was asked in 1999 by a group of guys at work who wanted to pool their money and buy a good stock, if Apple would be a good investment (if you remember many people had written Apple back off then). I said that there is no way that Apple would die, they are too innovative, more so than the average person realizes. I recommended that they invest in Apple. A few of them did, some later got scared and pulled out. The 2 that stayed in are soo happy! I wish I had a few bucks to rub together back then. I was just a broke tech lover and Apple was trading at around $50.
post #6 of 42
Wow... I knew it was a significant impact, but didn't realize it was that dramatic. It almost gives credence to "short the market, go long on AAPL" strategies. Unfortunately, it is hard to figure out how long-term it will work for AAPL to be so dominant. There has to be a backlash in a few years...
post #7 of 42
Quote:
Originally Posted by Sevenfeet View Post

"Why isn't Apple in the Dow Jones Industrial Average", in other words the top 30 stocks traded.

Toy companies are not considered industrial.

jk

Life is too short to drink bad coffee.

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Life is too short to drink bad coffee.

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post #8 of 42
"the Dow that everyone quotes as representative of the US stock market, and sometimes even a barometer of the US economy, is a mathematical farce.""

Economics is a mathematical farce so this should not be surprising.
you only have freedom in choice when you know you have no choice
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you only have freedom in choice when you know you have no choice
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post #9 of 42
Quote:
Originally Posted by Apple ][ View Post

Well, that's it! I finally made my move and I opened a trading account today.

In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.

From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.

Apple ][, What took you so long?

Still, better late than never.

Despite the strong rise in recent years, Apple is still incredibly good value. I think you will be amazed, and most pleasantly rewarded, by just how much Apple will grow over the next several years.

Apple still has huge headroom to grow. The iPhone only has 5% to 9% market share of mobile phones. The iPad is still at a very early stage, with tablet sales expected to increase nearly 10 fold to overtake PC sales.

Anyway, best of luck!
post #10 of 42
Quote:
Originally Posted by Secular Investor View Post

Apple ][, What took you so long?

Money, mainly.

Quote:
Originally Posted by Secular Investor View Post

Still, better late than never.

Despite the strong rise in recent years, Apple is still incredibly good value. I think you will be amazed, and most pleasantly rewarded, by just how much Apple will grow over the next several years.

Apple still has huge headroom to grow. The iPhone only has 5% to 9% market share of mobile phones. The iPad is still at a very early stage, with tablet sales expected to increase nearly 10 fold to overtake PC sales.

Even though I don't know much about stocks at all, I do know about Apple, and I agree with you.

Quote:
Originally Posted by Secular Investor View Post

Anyway, best of luck!

Thanks!
post #11 of 42
Quote:
Originally Posted by Apple ][ View Post

In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.

Good timing, too! Looks like Apple stock is starting its "consolidation" phase. It's down below $500 right now. I've been "all in" for a year and a half now, and no regrets.
post #12 of 42
Quote:
Originally Posted by Apple ][ View Post

Well, that's it! I finally made my move and I opened a trading account today.

In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.

From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.

Welcome to the nightmare/wet dream. On days like today, I watch the ticker with my cursor on the sell button.

Today, I timed it well. I sold 100 at $525, then bought 105 shares back (using an extra $250 in my account).

Shares climbed back to $512, I breathed a deep sigh of relief, then went to lunch.

Now I just want to cry. If I'd only sold it all at $525, then waited a day or two.

The wet dream part? I'm still up 25% so far this year.

That will be your life from now on
post #13 of 42
Quote:
Originally Posted by Apple ][ View Post

Well, that's it! I finally made my move and I opened a trading account today.

In a few days, when the money clears and other matters are taken care of, like sending in my signature, I will be putting some of my money where my mouth is and I'll be picking up some AAPL for the first time ever.

From now on, I'll not just be some guy with a bunch of Apple computers and devices who likes their products, but I will have a vested interest in the company as a shareholder.

Good call, buy high sell low...wait a sec...
You can't quantify how much I don't care -- Bob Kevoian of the Bob and Tom Show.
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You can't quantify how much I don't care -- Bob Kevoian of the Bob and Tom Show.
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post #14 of 42
apple is always the poster child.

why not add google & berkshire together and make a chart.

averages are nice to look at, after the fact.

just remember, while the all time high dow is doable, the nasdaq is still close to around half of its all time high.
post #15 of 42
"APPLE FOR PRESIDENT'..well it could happen.
post #16 of 42
Quote:
Originally Posted by I am a Zither Zather Zuzz View Post

This shit is surreal.

But also stupid. 'Stripping away' one company will also strip away component makers, makers of plastics/rubber/metal, retailers, distribution and logistics firms, producers of collateral gear, music companies, advertising agencies, etc. In other words, an entire web of production interdependencies in the real economy.

Indeed, stripping away a company like GM, with one-tenth of Apple's market cap, will take a much smaller bite out of the index, but a much bigger slice of the real economy.

In other words, an entirely bogus analysis meant for breathless, shallow media consumption.
post #17 of 42
Quote:
Originally Posted by LTMP View Post

Welcome to the nightmare/wet dream. On days like today, I watch the ticker with my cursor on the sell button.

Today, I timed it well. I sold 100 at $525, then bought 105 shares back (using an extra $250 in my account).

Shares climbed back to $512, I breathed a deep sigh of relief, then went to lunch.

Now I just want to cry. If I'd only sold it all at $525, then waited a day or two.

The wet dream part? I'm still up 25% so far this year.

That will be your life from now on

Yeah I bought 100 at $100.00. 2 weeks it split 2 for 1 , 30 days later it was 28.00.....Sept. 2001:
post #18 of 42
Quote:
Originally Posted by LTMP View Post

That will be your life from now on

This is will be Apple]['s life only if he's interested in losing his money sooner than later, wasting his time in the process, as a day-trader.

My suggestion for Apple][ (congrats, btw): Buy, hold, forget about it. Take the long view. You'll likely be wealthier (and saner).
post #19 of 42
Quote:
Originally Posted by a_greer View Post

Good call, buy high sell low...wait a sec...

Well, I don't exactly own a time machine which I can jump into and pick up some shares for real cheap. If I could've bought years ago, then I would have.

And I haven't bought anything yet. I believe that AAPL is going to continue to rise longterm, and in that case, I'll have to enter the game sometime if I wish to be a participant.
post #20 of 42
Quote:
Originally Posted by anantksundaram View Post

This is will be Apple]['s life only if he's interested in losing his money sooner than later, wasting his time in the process, as a day-trader.

My suggestion for Apple][ (congrats, btw): Buy, hold, forget about it. Take the long view. You'll likely be wealthier (and saner).

Oh yeah, I wouldn't worry about that.

I admit to knowing very little about the market, and I am only testing the waters. I used to play a bit of poker for money online before the FEDS stepped in and shut down the biggest sites a while ago, so I'm very used to cash swings that go up and down. I consider myself to be untiltable, to use poker terminology. And in poker, you can lose 100% of your cash in 1 hand. Even if AAPL were to go down with some percent, then big deal, it wouldn't phase me. I doubt that AAPL will ever be worth zero cents, so in that way, I see stocks as much safer and easier to play than poker. I'm just treating this stocks business like a video game.

I'm not planning on day trading, like those people who buy and sell a few minutes later. I just figure that I'd rather put my little bit of extra cash into AAPL instead of keeping it in some bank that pays virtually nothing in interest.
post #21 of 42
Quote:
Originally Posted by Apple ][ View Post

Oh yeah, I wouldn't worry about that.

I admit to knowing very little about the market, and I am only testing the waters. I used to play a bit of poker for money online before the FEDS stepped in and shut down the biggest sites a while ago, so I'm very used to cash swings that go up and down. I consider myself to be untiltable, to use poker terminology. And in poker, you can lose 100% of your cash in 1 hand. Even if AAPL were to go down with some percent, then big deal, it wouldn't phase me. I doubt that AAPL will ever be worth zero cents, so in that way, I see stocks as much safer and easier to play than poker. I'm just treating this stocks business like a video game.

I'm not planning on day trading, like those people who buy and sell a few minutes later. I just figure that I'd rather put my little bit of extra cash into AAPL instead of keeping it in some bank that pays virtually nothing in interest.

You are all brave men. I admire you.

I would do the same, as I have 100% faith in Apple.

Unfortunately, I have even more faith in America's inability to pay it's debts in the near future and, if they end up defaulting, like they probably will, it ain't gonna pretty what will happen to stock markets all around the world.

That's when I plan to buy in.

For those of you interested, check out www.usdebtclock.org

(The U. S. debt went up eight million dollars in the time it took me to type this post)
Smoke me a kipper. I'll be back for breakfast.
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Smoke me a kipper. I'll be back for breakfast.
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post #22 of 42
Quote:
Originally Posted by Sacto Joe View Post

Good timing, too! Looks like Apple stock is starting its "consolidation" phase. It's down below $500 right now. I've been "all in" for a year and a half now, and no regrets.

Oh yeah, you are sitting quite pretty! That's awesome.

I had to sell my shares last year at $360/per so I could put a downpayment on my house. Ugh.
post #23 of 42
Quote:
Originally Posted by Freshmaker View Post

Oh yeah, you are sitting quite pretty! That's awesome.

I had to sell my shares last year at $360/per so I could put a downpayment on my house. Ugh.

That's about where I bought it (338)
post #24 of 42
Quote:
Originally Posted by OldMacGuy View Post

That's about where I bought it (338)

Wow...so you're at like a 47% profit so far. Saweet!
post #25 of 42
Quote:
Originally Posted by GTR View Post

You are all brave men. I admire you.

I would do the same, as I have 100% faith in Apple.

Unfortunately, I have even more faith in America's inability to pay it's debts in the near future and, if they end up defaulting, like they probably will, it ain't gonna pretty what will happen to stock markets all around the world.

That's when I plan to buy in.

For those of you interested, check out www.usdebtclock.org

(The U. S. debt went up eight million dollars in the time it took me to type this post)

While I agree with you completely that the U.S. is simply not able to meet it's financial obligations, I disagree completely with your strategy.

The way governments with fiat money tied to nothing real always handle this is to rev up the printing presses. While holding interest rates at zero. So the value of your cash is slipping through your hands like sand.

Much better to own a fraction of an outstanding business which earns its profits across a very broad range of currencies, and will at least partially mitigate the plummeting value of the dollar (note, it is falling...regardless of it's relative standing against other currencies in the same mess).
post #26 of 42
Quote:
Originally Posted by Sacto Joe View Post

Good timing, too! Looks like Apple stock is starting its "consolidation" phase. It's down below $500 right now. I've been "all in" for a year and a half now, and no regrets.

I've been "all in" for a few years and the stock split 2 for 1 twice since I bought it (Apple doesn't anymore.) If they had not done those splits the stock would now be trading at around $2000 a share.
post #27 of 42
Quote:
Originally Posted by aaadktda View Post

(Apple doesn't anymore.)

Has Apple stated that they won't do it anymore, or have they just not done it in a long time?

For purely psychological and personal reasons, I'd love to see a 10:1 split, and then somebody like me could feel a whole lot better about owning more shares of AAPL. Even if the value were the same, 200 shares sounds a bit more impressive than a meager 20 shares, for example.
post #28 of 42
Quote:
Originally Posted by anantksundaram View Post

This is will be Apple]['s life only if he's interested in losing his money sooner than later, wasting his time in the process, as a day-trader.

My suggestion for Apple][ (congrats, btw): Buy, hold, forget about it. Take the long view. You'll likely be wealthier (and saner).

That's primarily my view as well, but I like to play the ups and downs a little bit.

I bought a few hundred shares two years ago at $198 (I think it was Feb 11). I decided to try hedging a bit when it hit the highs by selling off a bit (30 to 60%), then buying with the proceeds when it hit the lows.

By doing this over the last two years, I've added an extra 80 shares to my AAPL holdings.

Today I thought I'd get a bit braver, and jump back in quickly. I still managed to add an extra 5 shares (at a cost of $250 extra), but anytime I think I've timed things perfectly... I should know better.
post #29 of 42
Quote:
Originally Posted by anantksundaram View Post

But also stupid. 'Stripping away' one company will also strip away component makers, makers of plastics/rubber/metal, retailers, distribution and logistics firms, producers of collateral gear, music companies, advertising agencies, etc. In other words, an entire web of production interdependencies in the real economy.

Indeed, stripping away a company like GM, with one-tenth of Apple's market cap, will take a much smaller bite out of the index, but a much bigger slice of the real economy.

In other words, an entirely bogus analysis meant for breathless, shallow media consumption.

Yeah but most of the companies that make the stuff or do the stuff you mention do not form a part of the American economy. Is there one bit of the hardware in an apple product that's made or even extracted from the ground by an American company?
you only have freedom in choice when you know you have no choice
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you only have freedom in choice when you know you have no choice
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post #30 of 42
Quote:
Originally Posted by LTMP View Post

By doing this over the last two years, I've added an extra 80 shares to my AAPL holdings.

That's pretty good I'd say. 80 x $500 is nothing to sneeze at.
post #31 of 42
Quote:
Originally Posted by Sevenfeet View Post

This has been discussed in some financial circles when the question is posed "Why isn't Apple in the Dow Jones Industrial Average", in other words the top 30 stocks traded. Apple certainly falls into that category as the world's most valuable company. The problem is that Apple's growth has been so ridiculously out of what is normal for a big cap stock that apparently there wasn't a way to add Apple to the index and keep from radically distorting it. In other words, Apple's success isn't the same as all the other companies...its moving much faster than the rest of the economy and it would seem like the Dow was far better than the rest of the economy.

This isn't correct. The reason that AAPL can't be added to the Dow is that the Dow is a simple sum of prices of the 30 stocks, not a weighted average. Apple's share price is so high that it can't be substituted for an existing Dow stock without raising the average by several hundred points and then having an overweighted influence on the average going forward.
post #32 of 42
Quote:
Originally Posted by anantksundaram View Post

This is will be Apple]['s life only if he's interested in losing his money sooner than later, wasting his time in the process, as a day-trader.

My suggestion for Apple][ (congrats, btw): Buy, hold, forget about it. Take the long view. You'll likely be wealthier (and saner).

I agree. Apple can be considered a "Luxury" in the sense that the fundamentals are so in line, that you can worry "less" than with other Stocks, as even if it does get manipulated into a downward spiral, it always spurts up tenfold. I've tried Day Trading it, or beating myself up for "not trading it today", and it's a losing game. Best is to just go Long, IMO, mostly for sanity (unless you can handle it), and buy more when those precious buying opportunities may show up.

Welcome to the Club, Apple ][, glad to have you aboard. $700 is the new $500, and I still think AAPL is the best, most solid Stock with the best growth potential right now. I think that if it doesn't hit $600 this year, it would be considered an upset (but all signs point to it happening).

With such a solid floor of cash, possibilities of what to do with that cash, Tim Cook making people "feel comfortable" after fronting the company through it's most incredible earnings periods, Ipad 3, iTV, who knows what else, and iPhone 5 coming this year, and still a measly P/E of 14 (incredibly undervalued Stock), 2012 should hopefully be a great year (continue to be a great year), of course, "outside circumstances" are another story, but they always pass.
post #33 of 42
Can someone explain the tax implications of selling and buying back stock on a short term basis?

If was to sell say 100 AAPL today at a profit, then buying 105 back a few days later using all the profits, am I still liable to pay tax on those profits?
post #34 of 42
Yep. You need to hold it for a year or more to get the "Tax Discount" rate. Otherwise you just factor your profits into your regular "Wage Gains", per-se.
post #35 of 42
Quote:
Originally Posted by Godzilla View Post

Yep. You need to hold it for a year or more to get the "Tax Discount" rate. Otherwise you just factor your profits into your regular "Wage Gains", per-se.

I'm still a little confused.

By reinvesting the profits, are they not removed from taxable income?

Also, I've been accruing AAPL for a few years now. What determines whether the shares I sell are those I purchased in 2005 or those I purchased last week?
post #36 of 42
Actually, I JUST asked my friend your latter question today! Lol. I have no idea how that works. He says his Bank allows an Option that tells you "which Shares (purchased when) do you want to Sell"? Mine doesn't ask that. I figure you have to call your Bank to figure that out.

Even if you reinvest it, you still have to pay the Taxes on your gains (they essentially will get jumbled into your total gains, from work, etc., when you do your Taxes). What I learned (unfortunately) is that the IRS gets to see ALL the money you use to purchase (TOTAL) during the year. If you day trade the same $10K every day (say, to buy 100 Shares of a $100 Stock, and sell it to make just a couple of hundred), you'll see an exuberant of money "spent on Stocks", which will be significantly higher than the $10K you've used to get there.... when you may not have anything near that accumulated total.
post #37 of 42
Quote:
Originally Posted by jasonfj View Post

I'm still a little confused.

By reinvesting the profits, are they not removed from taxable income?

Also, I've been accruing AAPL for a few years now. What determines whether the shares I sell are those I purchased in 2005 or those I purchased last week?

one. good questions... the exact questions a CA (chartered account) or tax lawyer could answer

two. Paper trail.
post #38 of 42
Quote:
Originally Posted by Apple ][ View Post

That's pretty good I'd say. 80 x $500 is nothing to sneeze at.

As soon as I bought AAPL, it started going through these cycles where it would go up 10%, then drop 9% (give or take a few percent), then jump up prior to the earnings calls. This, to me, seemed to be part and parcel with the compression going on with its P/E ratio.

I think the days of large swings might be drawing to a close, but I think the strategy is a good, and safe, one for anybody holding Apple long.

When its had a big run up, sell off a portion of your holdings. There will almost always be a chance to buy back in at a lower price.

If the drop is cataclysmic, you have locked in some of your profit, so that you can buy back in when it starts to climb again, and if not, you can still get a small gain.

At worst, you miss out on the chance to make even more money.

What happened to me yesterday is a great example. Even the the overall value of my holdings has dropped a lot, I still added 5 shares.

And they will surely be worth much more than they are right now.
post #39 of 42
Quote:
Originally Posted by jasonfj View Post

I'm still a little confused.

By reinvesting the profits, are they not removed from taxable income?

Also, I've been accruing AAPL for a few years now. What determines whether the shares I sell are those I purchased in 2005 or those I purchased last week?

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What is really factored into the price is a kind of perpetual sense of disbelief that any company could be as good as Apple is. ~Retrogusto
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What is really factored into the price is a kind of perpetual sense of disbelief that any company could be as good as Apple is. ~Retrogusto
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post #40 of 42
Overinflated stock! Nice!
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