The Big Disconnect: Apple’s Stock Price Swoons, While the Stock Market Sings

Tuesday, 05 Mar 2013 07:45 AM

By John Morgan

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The major stock indexes are bumping around new highs, but the share price of market darling Apple is already in a bear market. What gives?

According to ETF Guide, what’s likely about to give is the overall stock market.

“Apple’s vicious decline is a precursor of what’s ahead for the rest of the stock market,” ETF Guide predicted.

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“Watch out when a leading stock turns into a laggard into such a short period of time. In case nobody bothered to tell you, stocks always fall faster than they rise.”

Apple hit a peak price of $705 in the fall of 2012, but hit a new 52-week low of $430.47 last week. That means the stock has fallen nearly 40 percent from its high.

But that apparently has not discouraged Wall Street from its love affair with all things Apple.

Apple is still the #1 ranked stock in the Standard & Poor’s 500 with the highest number of analyst buy ratings, ETF Guide said.

Apple is also #1 in terms of the largest percentage of upside difference between analysts’ mean target price and its closing price. Factset reported the mean target price for Apple is $729.84 today.

ETF Guide noted investors who got caught in the herd mentality about Apple have lately been “getting creamed.”

The ETF specialist publisher repeated its recent comparison between Apple and some dire market bubbles from history — the Dutch Tulip Mania in the 1600s, the gold and silver craze circa 1980 and Japan in the 1980s.

Barron’s reported fairly conflicting outlooks for Apple when the stock price hit its 52-week low on Friday.

Andre Bakhos, director of market analysis at New York-based Lek Securities, said the technical picture for Apple is not very bright.

“The Apple chart never triggered positively with our work since the turndown; now, the relief rally failed and more doom and gloom appear likely,” Bakhos told Barron’s.

However, Laurence Isaac Balter of Oracle Investment Research, who has a “strong buy” rating on the stock, noted Apple executives are required to buy three times their salary in stock, and that raising the dividend would be a great way for those executives to pay the bank loan interest of 4 percent to 5 percent to purchase the shares, Barron’s reported.

Meanwhile, Berkshire Hathaway’s Warren Buffet suggested on CNBC Monday that investors might be best off just ignoring speculation about Apple.

“I don’t own any Apple and I haven’t, though I did talk with Steve Jobs a few years ago about what they might do with the cash. The best thing you can do with a business is run it well, and the shares will respond,” Buffet said.

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