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Citigroup upgrades Apple on Tuesday's weakness

post #1 of 48
Thread Starter 
Citing yesterday's sharp pullback in share price, Citigroup on Wednesday upgraded shares of Apple from Hold to Buy and suggested that investors take advantage of present weakness to build their positions in the company.

"We see worst-case near-term downside to $115, but view the probability of a pull back to these levels as low," lead analyst Rich Gardner wrote in a research note. "With upside to $160, we would increase positions at current levels and simply use any near-term weakness to buy more shares."

Gardner noted that Apple shares declined some 6.8 percent or almost $10 Tuesday following rumblings of iPod and iPhone production cuts in Asia, but said the Street shouldn't have been alarmed by such cuts.

"iPod production cuts reflect normal channel inventory drawdown ahead of new product introductions in August or September," he explained. "More specifically, we expect higher-capacity Shuffles and nanos with lower price/GB, as well as a video iPod with an iPhone-like 3.5-inch diagonal screen and touch-screen controls."

Gardner also said at least one of the new video iPod models could use NAND flash memory instead of a 1.8-inch hard disk drive. While the move would undoubtedly cut into Apple's iPod margins, the analyst said his current estimates already factor in the shift.

On the other hand, Gardner said the rumored iPhone production cuts would reflect a return to more-reasonable estimates after very aggressive initial estimates from Apple to suppliers before the product's launch in June.

"We note that our estimate and consensus was 3.0 million iPhone units for 2007 before Tuesday’s talk of a reduction in build plan from 7 to 8 million units to around 4 million units," he wrote. "In our view, lower price points, 3G, and broader geographic distribution will be required before Apple can hope to sell 7 to 8 million units in six months, so this was never a reasonable expectation."

In his note to clients, the Citigroup analyst was also quick to remind investors that virtually all of the $310 million revenue upside to his June quarter Apple estimates came from higher-than-expected Mac sales. This strength in Macs, he said, should continue for the balance of this year for several reasons:

"First, Apple ended the June quarter with Mac channel inventory of three to four weeks, one to two weeks below the company’s target range. This clearly suggests imminent product transition(s) within the Mac line," he wrote. "Indeed, Apple announced Tuesday a 'Mac-related Press Event' at the company’s headquarters on Tuesday, 7 August, which likely will yield newly-redesigned flat-panel iMacs and perhaps other new Mac-related products as well."

The continued expansion of Apple’s relationship with Best Buy should also boost Mac volumes between now and year-end, in the analyst's opinion. Apple has said that it expects to expand its Best Buy distribution from 75 stores at the end of the second calendar quarter to more than 200 stores by the end of third, and more than 300 by the end of the year.

"Simply stocking these locations could add 50-100K units to Apple’s quarterly run rate between now and year-end," he explained.

In upgrading Apple shares Wednesday, Gardner maintained his $160 price target and made no changes to his estimates.
post #2 of 48
damn it so many idiotic investors driving Apple stock down by selling. I lost 10% of value last 2 days.

Apple stock has become almost as volatile as the junk stocks in recent months.
post #3 of 48
Quote:
In our view, lower price points, 3G, and broader geographic distribution will be required before Apple can hope to sell 7 to 8 million units in six months, so this was never a reasonable expectation."

When did Apple say that they were planning to sell 7-8 million in the next 6 months? I don't remember hearing this figure before.

m

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 #4 of 48
Quote:
Originally Posted by mstone View Post

When did Apple say that they were planning to sell 7-8 million in the next 6 months? I don't remember hearing this figure before.

m

Apple is down again today (1.76 last I checked). I really hate anylysts! They shoot off their mouths speculating about things they really don't have no idea about. While I do agree that Apple made a big mistake partnering with AT&T and that they should have come out with both a GSM and 3G models right from the beginning, I do not agree that the price point is too high for the iPhone.

Where the price gets heavy is when you add in the cost of AT&T's service. ANd even that isn't much more than what others are paying.

Considering all the good news starting to stream out of Cupertino, you would think that Apple's stock would continue it rocket climb.

Simply my opinion.
post #5 of 48
Quote:
Originally Posted by mstone View Post

When did Apple say that they were planning to sell 7-8 million in the next 6 months? I don't remember hearing this figure before.

They never did.

All this bull*hit is coming from click-whores like CNet/ZDnet, TheStreet.com and The Register. Even after Apple had announced they had sold 270,000 iPhones in the first 30 hours (20 hours being the actual time the stores where open for business) - these "news" sites kept belching out what "a disappointing figure" it was that Apple had sold only 146,000 iPhones (the number of phones AT&T actually activated in that 30 hours). Apple never announced a figure they were expecting to sell in the first weekend. It was the "press" that kept speculating - then when the real numbers come out - they compare the highest figure some wag pulled out his *ss to Apple's real numbers and arrive at the conclusion that "the iPhone launch was disappointing".

I don't know. It seems there is no respectable news organization anymore - they all want sensationalist "clickable" headlines with fluff news or simply outright lies.
post #6 of 48
They should change the name of this place from AppleInsider to wahhhhh my apple stock went down!

post #7 of 48
This is all Eminem's bad karma. It spreads to Apple's stock.
post #8 of 48
Quote:
Originally Posted by syklee26 View Post

damn it so many idiotic investors driving Apple stock down by selling. I lost 10% of value last 2 days.

Apple stock has become almost as volatile as the junk stocks in recent months.

It's still $10 higher than it was a month ago.

The problem is that people are buying and selling on exorbitant expectations and too little information, and it doesn't help that Apple's so secretive. The analysts aren't helping either, but they can do what they do only because people seem to trust them without having a very good reason to do so. I wish I had the time and patience to record these predictions and see how well each one does.

The volatility only seems to be that way in the last couple weeks:

http://finance.google.com/finance?q=AAPL
post #9 of 48
Quote:
Originally Posted by syklee26 View Post

damn it so many idiotic investors driving Apple stock down by selling. I lost 10% of value last 2 days.

Apple stock has become almost as volatile as the junk stocks in recent months.

Well, it's all in how you look at it. I see it as a fantastic buying opportunity, with 15% upside in the short term and 25% over the course of a couple months. (And I lost two months salary over the past two day... on paper, anyway.)

BTW, it has always been extremely volatile with AAPL. These huge swings are a little odd, but not uncommon after quarterly results.

One last thing... this analyst gets the most important thing for Apple right now-- Mac unit sales growth! This has the best long-term opportunity for Apple, as it gets people into the brand. New product lines are valued higher because they bring in brand-new revenue streams, but core business is what shows long-term strength.
post #10 of 48
Quote:
Originally Posted by aaarrrgggh View Post

(And I lost two months salary over the past two day... on paper, anyway.)

Let me get this straight: a 10% loss is two months salary? So you have almost two years' salary invested in AAPL?
post #11 of 48
Hey I lost half a years salary yesterday. It was awful, but it will recover.

I have faith in drjones. 160 by end of Oct.

We are green today, you know. The bottom was reached today at 127 and change.
post #12 of 48
Quote:
Originally Posted by Denton View Post

Let me get this straight: a 10% loss is two months salary? So you have almost two years' salary invested in AAPL?

Why is that so unusual?

You ARE supposed to save and invest.
post #13 of 48
this is the same analyst who put a "hold" recommendation on apple when it was at 100.

now the stock is overpriced (up close to to 75% for the year) and he recommends buying the stock since it came down slightly from its all-time high.

the stock has gotten ahead of itself.

wait, be patient, and buy it when it goes down to 120.
post #14 of 48
yayaya
post #15 of 48
Quote:
Originally Posted by madeincupertino View Post

this is the same analyst who put a "hold" recommendation on apple when it was at 100.

now the stock is overpriced (up close to to 75% for the year) and he recommends buying the stock since it came down slightly from its all-time high.

the stock has gotten ahead of itself.

wait, be patient, and buy it when it goes down to 120.

120? Unlikely.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #16 of 48
Apple is popular right now. Popular as in lots of people are talking about it and lots of people are trading it. Mentioning Apple is a sure way to get eyeballs/clicks. And "the herd" has always been sensitive to Apple news/rumors.

I wish I had the liquidity to pump some more $$$ into Apple. <$130 is a great buying opportunity. As this analyst noted, Apple's core business - computers - is doing great and a model refresh is expected soon. Longer term, add in the iPhone derived iPods, the iPhone-mini, the iPhone expansion to Europe, Apple TV 2.0, etc., etc. and Apple has a lot of good things in store.

- Jasen. (AAPL shareholder since $17 per share - but not enough to retire )
post #17 of 48
I love capitalism!

Bank stockbroker buys Apple stock.
Bank analyst predicts good times for Apple.
Apple stock goes up.
Bank stockbroker sells Apple stock and makes a tidy profit.
Bank analyst predicts trouble for Apple.
Apple stock goes down.

The bank makes lots of money while everyone else gets screwed.
post #18 of 48
Quote:
Originally Posted by melgross View Post

Why is that so unusual?

You ARE supposed to save and invest.

Congratulations about the Apple stock you that own doing so well. However many people on this board seem to be a bit overenthusiastic about Apple stock. If you are making major investments in a single stock (i.e., more than 5% of your portfolio) you are taking tremendous risk. Memories are short but I would remind you all about the late spring of 2001 and 99% of internet companies and also stocks like Global Crossing, Lucent, Enron (It was considered a world class company before it was exposed as a giant fraud), and WorldCom. Mom 'n Pop investors got cleaned out.

Stocks can be volatile beyond a 10% move. It even happens with Apple. When I was making equity options markets (Yes I am a pro trader and have an intimate relationship with risk), a friend of mine bought 100 apple call options with the stock around $60 in 2002. That is the equivalent of 10,000 shares. Typically one would sell short about 5000 shares of apple to hedge risk, but he didn't because he wanted to sell stock a dime higher. By the time he traveled 5 floors to the office after the close Apple fell $30 or 50% in after hours trading. I think he lost about $180,000+ in 5 minutes that afternoon because he was greedy and wanted to make an addition $500 on the trade.

As a fellow Apple enthusiast (I can't wait for the new iMac) I would urge you to act like a Wall Street pro and pare back some of your apple position, enjoy your profits and bragging rights on a good trade. Then use the proceeds and buy a S&P 500 ETF like IVV. That is prudent saving and investing.

You may not make as great of returns but your risk level will plummet.
post #19 of 48
Quote:
Originally Posted by farmboy1 View Post

Congratulations about the Apple stock you that own doing so well. However many people on this board seem to be a bit overenthusiastic about Apple stock. If you are making major investments in a single stock (i.e., more than 5% of your portfolio) you are taking tremendous risk. Memories are short but I would remind you all about the late spring of 2001 and 99% of internet companies and also stocks like Global Crossing, Lucent, Enron (It was considered a world class company before it was exposed as a giant fraud), and WorldCom. Mom 'n Pop investors got cleaned out.

Stocks can be volatile beyond a 10% move. It even happens with Apple. When I was making equity options markets (Yes I am a pro trader and have an intimate relationship with risk), a friend of mine bought 100 apple call options with the stock around $60 in 2002. That is the equivalent of 10,000 shares. Typically one would sell short about 5000 shares of apple to hedge risk, but he didn't because he wanted to sell stock a dime higher. By the time he traveled 5 floors to the office after the close Apple fell $30 or 50% in after hours trading. I think he lost about $180,000+ in 5 minutes that afternoon because he was greedy and wanted to make an addition $500 on the trade.

As a fellow Apple enthusiast (I can't wait for the new iMac) I would urge you to act like a Wall Street pro and pare back some of your apple position, enjoy your profits and bragging rights on a good trade. Then use the proceeds and buy a S&P 500 ETF like IVV. That is prudent saving and investing.

You may not make as great of returns but your risk level will plummet.

Normally I would agree with most of your sentiments. But Apple is no internet company. Most of those companies did not even post a profit and they were trading at ridiculous P/E's. Yes aapl is a bit pricey given its higher then safe p/e of 39. But your example about the guy who lost 180K is not the proper one to justify buying only 5% of aapl in your portfolio. Options trading is very risky. Long term like 5 to 10 years makes aapl a great investment. I am in 100% because I know that Apple is at the beginning of a great upward movement. Sure we might have economic slowdowns, part issues, recalls, possible scandles, and recessions. But in 5 years at 133 aapl was a bargain of a life time.
post #20 of 48
Quote:
Originally Posted by farmboy1 View Post

Congratulations about the Apple stock you that own doing so well. However many people on this board seem to be a bit overenthusiastic about Apple stock. If you are making major investments in a single stock (i.e., more than 5% of your portfolio) you are taking tremendous risk. Memories are short but I would remind you all about the late spring of 2001 and 99% of internet companies and also stocks like Global Crossing, Lucent, Enron (It was considered a world class company before it was exposed as a giant fraud), and WorldCom. Mom 'n Pop investors got cleaned out.

Stocks can be volatile beyond a 10% move. It even happens with Apple. When I was making equity options markets (Yes I am a pro trader and have an intimate relationship with risk), a friend of mine bought 100 apple call options with the stock around $60 in 2002. That is the equivalent of 10,000 shares. Typically one would sell short about 5000 shares of apple to hedge risk, but he didn't because he wanted to sell stock a dime higher. By the time he traveled 5 floors to the office after the close Apple fell $30 or 50% in after hours trading. I think he lost about $180,000+ in 5 minutes that afternoon because he was greedy and wanted to make an addition $500 on the trade.

As a fellow Apple enthusiast (I can't wait for the new iMac) I would urge you to act like a Wall Street pro and pare back some of your apple position, enjoy your profits and bragging rights on a good trade. Then use the proceeds and buy a S&P 500 ETF like IVV. That is prudent saving and investing.

You may not make as great of returns but your risk level will plummet.

I've been investing since I was 13, back in 1963. In all that time, I've been told that you should have a "basket" of stocks. The idea being that when half go down, the other half would go up, saving you from loss (that is the simplistic version I know).

I would never say that one should not have more than 5% of your stock portfolio in one stock. That's foolish advice. It assumes that you have made little investigation into any of the stock you buy. If that is so, don't invest in stocks at all.

My attitude has always been that I'm not investing so that my portfolio stays the same. I'm not interested in investing in 4 bad stocks as well as 4 good stocks. What they don't say about that strategy, is that you don't do well with it unless the market is also doing well.

The same is true of mutual funds. The more diversified they are, the more they perform like the market.

But, smaller funds can do well for a few years, and then flop after that. In fact, that is almost always what happens. The fund manager of the year today, is often out of a job two years from now.

So, no, I prefer to know exactly what I'm doing. I have never used bird-shot to pick my stocks, except in the later '90's when picking almost any tech IPO made me plenty of money in the short term.

I know the computer industry, and some related industries. I stick to that, and go nowhere else. It's served me well. I have few stocks now, though I have other investments.

I don't recommend that anyone just buy stocks. A balanced portfolio is the safest thing for most people. If you are young, and have a good career, with little responsibilities, you can be less risk adverse, and take greater chances for higher returns.

But, as you get older, and have a family, possibly a mortgage, you have to be more careful. A savings account, stocks, and other less volatile securities is what I would recommend.

As you get towards the latter part of your life, income producing investments should predominate, unless you have enough so that you can afford to lose a lot, and have no need to leave much to your family.

Always be cautious. I never advocate recklessness.
post #21 of 48
Quote:
Originally Posted by g5man View Post

Options trading is very risky. Long term like 5 to 10 years makes aapl a great investment. I am in 100% because I know that Apple is at the beginning of a great upward movement. Sure we might have economic slowdowns, part issues, recalls, possible scandles, and recessions. But in 5 years at 133 aapl was a bargain of a life time.

The options trade to which your reply refers was very risky. It is a myth that all options
trading is risky, when in fact, option strategies can be devised which greatly reduce the
risk of a stock portfolio. For just one simple example, someone who has 100% of their
portfolio invested in one stock might want to consider buying some out of the money
protective puts as insurance against a huge drop in that stock. Such a drop might occur
in the event of the death, serious illness, or retirement of a key executive.
post #22 of 48
Quote:
Originally Posted by Shaun, UK View Post

I love capitalism!

Bank stockbroker buys Apple stock.
Bank analyst predicts good times for Apple.
Apple stock goes up.
Bank stockbroker sells Apple stock and makes a tidy profit.
Bank analyst predicts trouble for Apple.
Apple stock goes down.

The bank makes lots of money while everyone else gets screwed.

You forgot the part where they sell AAPL short after predicting trouble... so they make money both selling and buying.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #23 of 48
Quote:
Originally Posted by melgross View Post

I've been investing since I was 13, back in 1963. In all that time, I've been told that you should have a "basket" of stocks. The idea being that when half go down, the other half would go up, saving you from loss (that is the simplistic version I know).

I would never say that one should not have more than 5% of your stock portfolio in one stock. That's foolish advice. It assumes that you have made little investigation into any of the stock you buy. If that is so, don't invest in stocks at all.

My attitude has always been that I'm not investing so that my portfolio stays the same. I'm not interested in investing in 4 bad stocks as well as 4 good stocks. What they don't say about that strategy, is that you don't do well with it unless the market is also doing well.

etc etc.

You do make many great points, but just two parts I would comment on: the 'diversification' argument ("The idea being that when half go down, the other half would go up, saving you from loss.") and the implication that a well-researched stock-picking strategy is preferred to a diversification strategy since "What they don't say about that [latter] strategy, is that you don't do well with it unless the market is also doing well."

The main argument for diversification is that it is a relatively simple, cheap way to mimic the market, and it is a tough strategy to beat for most people (however, some do beat it). In the past 100 years, the US market has produced about 12% annual average returns (altho the expected returns going forward are lower, perhaps closer to 9% - 10%). That is quite a significant return. E.g., $1 invested in 1926 would be worth about $150,000 at the end of 2006 if someone had followed a simple diversified, market-mimicking strategy. Moreover, it won't save you from a loss, as your diversification advice seems to suggest -- there has been a standard deviation of roughly 20% per year around the 12%, meaning (roughly) that there is a two-third probability that in any given year, the return could be as low as -8% or as high as +32%. So you could certainly end up with a loss too, depending on when you get in/get out.

Re. the second point, even portfolios created by well-researched stock-picking strategies are not immune to market movements. Every stock has two sources of risk: The diversifiable or 'unsystematic' risk (which can be easily got rid of by diversification), and the non-diversifiable or 'systematic' risk (which results from systemic, market-wide, non-diversifiable factors). The latter, one can do little about (except to buy portfolio puts, which will naturally lower the return). Risks resulting from comovement with the market are necessarily a part of one's portfolio, regardless of whether the portfolio resulted from careful stock-picking or not. (For instance, I'd venture a guess that your portfolio also took some beating last week!).

Btw, I have absolutely nothing against picking stocks based on good research -- indeed, many people (including me) make money at it (sometimes because of skill, sometimes because of luck). But recognize that even in that situation, by the time one gets to a portfolio of 30 or so carefully picked stocks, one has de facto ended up with a (reasonably) diversified portfolio!
post #24 of 48
Quote:
Originally Posted by SpamSandwich View Post

You forgot the part where they sell AAPL short after predicting trouble... so they make money both selling and buying.

you they make real bicks!!
post #25 of 48
Quote:
Originally Posted by tycoonjo View Post

you they make real bicks!!

Uh... heh, heh.... OK.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #26 of 48
Quote:
Originally Posted by anantksundaram View Post

You do make many great points, but just two parts I would comment on: the 'diversification' argument ("The idea being that when half go down, the other half would go up, saving you from loss.") and the implication that a well-researched stock-picking strategy is preferred to a diversification strategy since "What they don't say about that [latter] strategy, is that you don't do well with it unless the market is also doing well."

The main argument for diversification is that it is a relatively simple, cheap way to mimic the market, and it is a tough strategy to beat for most people (however, some do beat it). In the past 100 years, the US market has produced about 12% annual average returns (altho the expected returns going forward are lower, perhaps closer to 9% - 10%). That is quite a significant return. E.g., $1 invested in 1926 would be worth about $150,000 at the end of 2006 if someone had followed a simple diversified, market-mimicking strategy. Moreover, it won't save you from a loss, as your diversification advice seems to suggest -- there has been a standard deviation of roughly 20% per year around the 12%, meaning (roughly) that there is a two-third probability that in any given year, the return could be as low as -8% or as high as +32%. So you could certainly end up with a loss too, depending on when you get in/get out.

Re. the second point, even portfolios created by well-researched stock-picking strategies are not immune to market movements. Every stock has two sources of risk: The diversifiable or 'unsystematic' risk (which can be easily got rid of by diversification), and the non-diversifiable or 'systematic' risk (which results from systemic, market-wide, non-diversifiable factors). The latter, one can do little about (except to buy portfolio puts, which will naturally lower the return). Risks resulting from comovement with the market are necessarily a part of one's portfolio, regardless of whether the portfolio resulted from careful stock-picking or not. (For instance, I'd venture a guess that your portfolio also took some beating last week!).

Btw, I have absolutely nothing against picking stocks based on good research -- indeed, many people (including me) make money at it (sometimes because of skill, sometimes because of luck). But recognize that even in that situation, by the time one gets to a portfolio of 30 or so carefully picked stocks, one has de facto ended up with a (reasonably) diversified portfolio!

Going by that strategy, you might as well have a portfolio with a market tracking strategy. That way their portfolio will mimic the market closely.

But, with anything else, you still must check the individual elements in your portfolio.

The idea of "well researched" varies. Some consider looking at the stock price for the last month as being "well researched".

I rarely look at indicators investment councillors attend to. I find they are too money oriented, and not enough product oriented, or oriented as to exactly where the company fits within the industry, or in the minds of the customer. I also look to where their R&D is going. Is it just just for product purposes, or do they have longer term goals in mind? Do they do some theoretical work, or is it all second source?

Even if you pick what seems to be a good portrayal of the market average, some of those stocks will turn into dogs, and bring the value of everything down.

I spend much more time on research in a much more limited area. That way I can understand that area far better.

I don't try to adjust to meet the market, I always aim to beat it.

When the market gets cold, I withdraw until such time I think I can make some investments that will move ahead.

Since I'm not investing for others, I don't have to worry about people pulling funds from their accounts. I'm responsible only to myself.
post #27 of 48
Am I the only one noticing that whenever one of these 'analysts' speaks, what comes out is consistently either:

A) Completely silly and worthless, or

B) Reasonable, but someone on AppleInsider already posted the same thing a day or two earlier?
Journalism is publishing what someone doesn't want us to know; the rest is propaganda.
-Horacio Verbitsky (el perro), journalist (b. 1942)
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Journalism is publishing what someone doesn't want us to know; the rest is propaganda.
-Horacio Verbitsky (el perro), journalist (b. 1942)
Reply
post #28 of 48
Quote:
Originally Posted by Lafe View Post

Am I the only one noticing that whenever one of these 'analysts' speaks, what comes out is consistently either:

A) Completely silly and worthless, or

B) Reasonable, but someone on AppleInsider already posted the same thing a day or two earlier?

AppleInsider: The Analyst's Secret Reference.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #29 of 48
Quote:
Originally Posted by anantksundaram View Post

Btw, I have absolutely nothing against picking stocks based on good research -- indeed, many people (including me) make money at it (sometimes because of skill, sometimes because of luck). But recognize that even in that situation, by the time one gets to a portfolio of 30 or so carefully picked stocks, one has de facto ended up with a (reasonably) diversified portfolio!

Both you and melgross make good points. But your very last statement got me.

Unless you are a professional money manager of some kind, or you are retired and able to spend essentially full-time managing your investment portfolio, I posit that one cannot carefully manage that many different stocks. Keeping careful tabs on a company and its stock takes many, or at least several hours each month - if you're going to really do a good job. And if you're not going to do a good job, you might as well just buy a couple broad index funds. If you have 30 stocks and spend only 1.5 hours/week/stock doing your diligence, that's already more than a full-time job. Well, in some people's eyes anyway. ;-) Assuming those 30 stocks are in at least a half-dozen different industries, you need to keep up on industry-wide research as well. And unless you keep constant ratios in equty/bonds/cash, you need to keep up on macro trends as well, although that's probably less time-consuming.

This conversation reminds me of a friend, who a few years back fancied himself as an investor. Bought into a bunch of stocks. But his "research" was basically following a few analysts' "hot tips", reading a few articles and jumping in. He kept telling me how and why his stocks were going to do well. But he "invested" (gambled) in a wide variety of stocks over a wide variety of industries. While that's great for diversification, there are very, very few individuals who can keep abreast of more than a couple industries in a deep, meaningful way. And by that, I mean enough to be a step ahead of the general market. Because if, instead, you're a step behind, often that's all it takes to turn profits into losses.

As for my friend? He had some winners and some losers, but overall he lost a lot of money. Money he could ill-afford to lose. He still "invests", but I don't hear much about it anymore because he got tired of hearing "I told you so."

Me, I stick with just a couple industries where I have intimate knowledge. Outside of that, it's index funds. And yes, I've done quite well over the years. :-)

[Ok, I see melgross replied already, and as usual, we're pretty much on the same page]
No Matte == No Sale :-(
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No Matte == No Sale :-(
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post #30 of 48
Quote:
Originally Posted by g5man View Post

Hey I lost half a years salary yesterday. It was awful, but it will recover.

I have faith in drjones. 160 by end of Oct.

We are green today, you know. The bottom was reached today at 127 and change.

Thank you, I have faith in Steve Jobs. 160 will be easy by halloween ,, and you can guess when to jump in and out but i find safe is buy and hold AAPL and hock yourself to your a-hole and back works real well lol .
post #31 of 48
Quote:
Originally Posted by Shaun, UK View Post

I love capitalism!

Bank stockbroker buys Apple stock.
Bank analyst predicts good times for Apple.
Apple stock goes up.
Bank stockbroker sells Apple stock and makes a tidy profit.
Bank analyst predicts trouble for Apple.
Apple stock goes down.

The bank makes lots of money while everyone else gets screwed.

And then the stockbroker buys back twice as much and then recommends it again as in today.
post #32 of 48
Quote:
Originally Posted by melgross View Post

Going by that strategy, you might as well have a portfolio with a market tracking strategy. That way their portfolio will mimic the market closely.

One can (either with luck or skill) end up with a diversified portfolio whose individual components are researched, screened, and selected, and still beats the market -- the strategy of a Peter Lynch at Fidelity Magellan comes to mind.

My point was only that diversification can, by accident or design, end up being for all, while stock-picking is not for all. The latter is consistent your original point, and it is one that I agree with. The former was something that I was attempting to clarify, that's all. In addition, I was suggesting that all risky assets, including stocks, contain both unique risks and systemic (or market-comovement) risks.
post #33 of 48
Quote:
Originally Posted by tycoonjo View Post

you they make real bicks!!

Quote:
Originally Posted by SpamSandwich View Post

Uh... heh, heh.... OK.

Ermm....You know....the Pickles...
post #34 of 48
Quote:
Originally Posted by Blah64 View Post

Both you and melgross make good points. But your very last statement got me.

Unless you are a professional money manager of some kind, or you are retired and able to spend essentially full-time managing your investment portfolio, I posit that one cannot carefully manage that many different stocks. Keeping careful tabs on a company and its stock takes many, or at least several hours each month - if you're going to really do a good job. And if you're not going to do a good job, you might as well just buy a couple broad index funds. If you have 30 stocks and spend only 1.5 hours/week/stock doing your diligence, that's already more than a full-time job. Well, in some people's eyes anyway. ;-) Assuming those 30 stocks are in at least a half-dozen different industries, you need to keep up on industry-wide research as well. And unless you keep constant ratios in equty/bonds/cash, you need to keep up on macro trends as well, although that's probably less time-consuming.

This conversation reminds me of a friend, who a few years back fancied himself as an investor. Bought into a bunch of stocks. But his "research" was basically following a few analysts' "hot tips", reading a few articles and jumping in. He kept telling me how and why his stocks were going to do well. But he "invested" (gambled) in a wide variety of stocks over a wide variety of industries. While that's great for diversification, there are very, very few individuals who can keep abreast of more than a couple industries in a deep, meaningful way. And by that, I mean enough to be a step ahead of the general market. Because if, instead, you're a step behind, often that's all it takes to turn profits into losses.

As for my friend? He had some winners and some losers, but overall he lost a lot of money. Money he could ill-afford to lose. He still "invests", but I don't hear much about it anymore because he got tired of hearing "I told you so."

Me, I stick with just a couple industries where I have intimate knowledge. Outside of that, it's index funds. And yes, I've done quite well over the years. :-)

[Ok, I see melgross replied already, and as usual, we're pretty much on the same page]

I guess it must be in the points of emphasis, but I think you and I are saying the same thing! I certainly do not recommend that people spend/waste time picking stocks. Life is too short for that (unless that is one's job). In turn, that only heightens the importance of diversification. That said, it makes perfect sense to use one's unique experiences and knowledge to pick a circumscribed set within one's sphere of competence. Both diversification and limited asset selection are important to building one's portfolio. (And, I should add, buying-and-holding, so as to minimize the impact of transactions costs and taxes, whose compounding effects can be huge over time).

Indeed, your strategy of "Me, I stick with just a couple industries where I have intimate knowledge. Outside of that, it's index funds" is one that I would heartily endorse, and personally follow!

I was pointing out the irony in the view that some people have that stock-picking (as opposed to diversification) is a better strategy, by noting that, when you have picked enough stocks (and I should have added, across enough industries), you end up, by accident or design, with a diversified portfolio. And, the fact that, while diversification can be a sensible strategy for all, stock-picking is not necessarily so.
post #35 of 48
Quote:
Originally Posted by anantksundaram View Post

One can (either with luck or skill) end up with a diversified portfolio whose individual components are researched, screened, and selected, and still beats the market -- the strategy of a Peter Lynch at Fidelity Magellan comes to mind.

My point was only that diversification can, by accident or design, end up being for all, while stock-picking is not for all. The latter is consistent your original point, and it is one that I agree with. The former was something that I was attempting to clarify, that's all. In addition, I was suggesting that all risky assets, including stocks, contain both unique risks and systemic (or market-comovement) risks.

I don't recommend that everyone do as I do. In fact, I often recommend that people do NOT do as I do.

You have to be comfortable with your methodology and knowledge.

You also have to be comfortable with the fact that at some point you will make a big blunder.

Not selling Apple at 86 before it went down to 50 could be considered as being a blunder, as was buying more at 73 on the way down, instead of waiting.

But, I was certain it would go back again, so it didn't bother me, therefor, I didn't panic and sell lower.
post #36 of 48
Quote:
Originally Posted by anantksundaram View Post

I guess it must be in the points of emphasis, but I think you and I are saying the same thing! I certainly do not recommend that people spend/waste time picking stocks. Life is too short for that (unless that is one's job). In turn, that only heightens the importance of diversification. That said, it makes perfect sense to use one's unique experiences and knowledge to pick a circumscribed set within one's sphere of competence. Both diversification and limited asset selection are important to building one's portfolio. (And, I should add, buying-and-holding, so as to minimize the impact of transactions costs and taxes, whose compounding effects can be huge over time).

We do agree, the difference is emphasis. But, that's natural. Everyone can't have the exact same strategy.

I keep pointing out the costs of trading. If it reduces your profits to just a few percent, considering that we are not money managers dealing with hundreds of millions to tens of billions, all of the work involved clearly doesn't pay. And the chance that one guessed wrongly, could easily wipe out all of the other small gains so laboriously managed.

Quote:
Indeed, your strategy of "Me, I stick with just a couple industries where I have intimate knowledge. Outside of that, it's index funds" is one that I would heartily endorse, and personally follow!

I was pointing out the irony in the view that some people have that stock-picking (as opposed to diversification) is a better strategy, by noting that, when you have picked enough stocks (and I should have added, across enough industries), you end up, by accident or design, with a diversified portfolio. And, the fact that, while diversification can be a sensible strategy for all, stock-picking is not necessarily so.

Stock picking, in and of itself, is no virtue. I don't recommend it for most people.

Even here, on this board, with Apple, most people are just buying it because of a sense of loyalty, or infatuation, the way people tend to buy the stock of the company they work for.
post #37 of 48
Quote:
Originally Posted by melgross View Post

But, I was certain it would go back again, so it didn't bother me, therefor, I didn't panic and sell lower.

Nice. Although that comes with experience.

Anyway, just wanted to say that this analyst Richard Gardner is not someone I've cared to follow. He's always been scared to take a stand. He's mostly playing it safe whenever he comes out with a report with a Buy or Hold recommendation. He's never had the guts, or the belief, to predict anything solid with confidence. He's doing his job alright, but not doing it well. The only thing in his favor today is timing. The upgrade came out on a day when AAPL badly needed a boost.

BTW, here's what Gene Munster of Piper Jaffray had to say about Gardner:

--------------------

Gardner is a Chump

Sorry but that's the truth. The guy throws the Buy on after sell offs. He gets paid to tell people to initiate a position after irrational selling. Duh, yeah if you've been out of aapl, sure that would be a good time to move in.

Another well-crafted rumor play hits yesterday, so he removes the Hold rating. So now aapl is a Buy, but still sell it at $160. Right, sell it just like the $110 target you had on it until last week. His last Buy was in the low 80s after a 15% sell off.

So, in at $82, out at $110, in at $130, out at $160. Uh, OK. My people don't leave that kind of cash on the table, they add to their positions during nonsense like yesterday.

--------------------
post #38 of 48
Quote:
Originally Posted by dreamraj View Post

BTW, here's what Gene Munster of Piper Jaffray had to say about Gardner:

--------------------

Gardner is a Chump

Sorry but that's the truth. The guy throws the Buy on after sell offs. He gets paid to tell people to initiate a position after irrational selling. Duh, yeah if you've been out of aapl, sure that would be a good time to move in.

Another well-crafted rumor play hits yesterday, so he removes the Hold rating. So now aapl is a Buy, but still sell it at $160. Right, sell it just like the $110 target you had on it until last week. His last Buy was in the low 80s after a 15% sell off.

So, in at $82, out at $110, in at $130, out at $160. Uh, OK. My people don't leave that kind of cash on the table, they add to their positions during nonsense like yesterday.

--------------------

When/where did he say this?
post #39 of 48
Quote:
Originally Posted by anantksundaram View Post

When/where did he say this?

It does seem unlikely.
post #40 of 48
Quote:
Originally Posted by anantksundaram View Post

When/where did he say this?

Quote:
Originally Posted by melgross View Post

It does seem unlikely.

Chump
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